A bond that has

$1,000

par value (face value) and a contract or coupon interest rate of

11

percent. A new issue would have a floatation cost of

5

percent of the

$1,125

market value. The bonds mature in

9

years. The firm's average tax rate is 30 percent and its marginal tax rate is

22

percent.

What is the firms after tax cost of debt on the bond?