1. The Ess Kay Refrigerator Company is deciding to issue 2,000,000 of 1,000, 14 per cent, 7...

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1. The Ess Kay Refrigerator Company is deciding to issue 2,000,000 of 1,000, 14 per cent, 7 year debentures. The debentures will have to be sold at a discount rate of 3 per cent. Further, the firm will pay an underwriting fee of 3 per cent of the face value. Assume a 35 per cent tax rate. Calculate the after-tax cost of the issue. What would be the after-tax cost if the debenture were sold at a premium of 30?

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