$9-2.($Individual or component costs of capital$)$ Compute the cost of the following:

a$.$ A government bond that has a $$1,000$ par value $($face value$)$ and a contract or coupon interest rate of $8$ percent. A new issue would have a flotation cost of $4$ percent of the $$1,150$ market value. The bonds mature in $11$ years. The firm's average tax rate is $24$ percent, and its marginal tax rate is $21$ percent.

b$.$ A new common stock issued by LVMH paid a $$2$ dividend last year. The par value of the stock is $$16,$ and earnings per share have grown at a rate of $8$ percent per year. This growth rate is expected to continue into the foreseeable future. The company maintains a constant dividend$-$earnings ratio of $34$ percent. The price of this stock is now $$28\mathrm{.}70,$ but $4$ percent flotation costs $($as a percent of market price$)$ are anticipated.