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What if the flotation costs

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Suppose a company will issue new 25-year debt with a par value of $1,000 and a coupon rate of 10%, paid annually. The issue price will be $1,000. The tax rate is 40%. If the flotation cost is 6% of the issue proceeds, then what is the after-tax cost of debt? Disregard the tax shield from the amortization of flotation costs. Round your answer to two decimal places.

%

What if the flotation costs were 12% of the bond issue? Round your answer to two decimal places.

%

Reference no: EM132265885

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