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Carraway Seed Company is issuing a ​1,000 par value bond that pays 6 percent annual interest and matures in 8 years....

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Question

Finance

Carraway Seed Company is issuing a

​1,000

par value bond that pays

6

percent annual interest and matures in

8

years. Investors are willing to pay

​$935

for the bond. Flotation costs will be

11

percent of market value. The company is in a

20

percent tax bracket. What will be the​ firm's after-tax cost ofdebt on the​ bond?

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