$160$ h$.$ Delta is interested in establishing a new division that will focus primarily on developing new $161$ Internet$-$based projects. In trying to determine the cost of capital for this new division, you $162$ discover that specialized firms involved in similar projects have, on average, the following $163$ characteristics: $(1)$ their capital structure is $15\%$ debt and $85\%$ common equity, $(2)$ their cost of $164$ debt is typically $12\%,$ and $(3)$ they have a beta of $1\mathrm{.}75.$ Given this information, what would your $165$ estimate be for the new division's cost of capital?

$166$

$167$ i$.(1)$ Delta estimates that if it issues new common stock, the flotation cost will be $12\mathrm{.}5\%.$

$168$ Delta incorporates the flotation costs into the DCF approach. What is the estimated cost

$169$ of newly issued common stock, taking into account the flotation cost?

$170$

$171(2)$ Suppose Delta issues $30-$year debt with a par value of $$1,000$ and a coupon rate of $10\%,$ paid annually.

$172$ If flotation costs are $3\%,$ what is the after$-$tax cost of debt for the new bond issue?

$173$

$174$