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The Cost of Debt and Flotation Costs. Suppose a company will issue new 25-year debt...

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Finance

The Cost of Debt and Flotation Costs.

Suppose a company will issue new 25-year debt with a par value of $1,000 and a coupon rate of 11%, paid annually. The issue price will be $1,000. The tax rate is 35%. If the flotation cost is 5% 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 11% of the bond issue? Round your answer to two decimal places. %

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