10.1

10.2

The Holmes Company's currently outstanding bonds have an 8% coupon and a 10% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is Holmes' after-tax cost of debt? Round your answer to two decimal places. % Torch Industries can issue perpetual preferred stock at a price of $69.00 a share. The stock would pay a constant annual dividend of $6.50 a share. What is the company's cost of preferred stock, rp? Round your answer to two decimal places