Calculate the ?after-tax cost of financing with alternative

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Reference no: EM131311064

Gronseth Drywall? Systems, Inc., is in discussions with its investment bankers regarding the issuance of new bonds. The investment banker has informed the firm that different maturities will carry different coupon rates and sell at different prices. The firm must choose among several alternatives. In each?case, the bonds will have a $1,000 par value and flotation costs will be $40 per bond. The company is taxed 30%. Use the approximation formula to calculate the ?after-tax cost of financing with the following alternative.

Coupon Rate is 6%

Time to Maturity is 12 years

Premium or Discount is -$260

The? after-tax cost of financing using the approximation formula is ___%?

Reference no: EM131311064

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