Markle Ltd. has issued $7.5 million worth of bonds with an interest rate of 10%, payable annually, and redemption in 10 years. The issue price of the bond is $85 per $100 of nominal value. If Markle's tax rate is 35%, what is the cash flow each year that is associated with this debt?

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The inflow at Year 0 is $6.38 million, calculated as $7.5 million * 0.85. The annual interest payment is $750,000 ($7.5 million * 10%), and after tax, it is $487,500 ($750,000 * (1 - 0.35)). However, the cash flow considers the full interest payment. In Year 10, the outflow includes the principal repayment of $7.5 million plus the interest payment, totaling $8.25 million.