40% from common equity. Their common dividend payout ratio is 60%, they paid a dividend of $1.61 per share yesterday, the dividend is expected to grow to $4.27 in 20 years, and is expected to continue this growth rate into the foreseeable future. The common stock has a current market price of $18, and their investment banker suggests a flotation cost of 6% of market value on new common equity.

Calculate the after-tax cost of the new bond financing.

A	YTM on current bonds
	Addition due to longer term of new bonds
	Coupon rate for new bonds
	YTM on new bonds (adjusted for flotation costs)
	Income tax adjustment
	After-tax cost of new bonds