Cold Duck's CFO has pointed out that the firm would incur a flotation cost of $3\%$ when initially issuing the bond issue. Remember, the flotation costs will b the proceeds the firm will receive after issuing its new bonds. The firm's marginal federal$-$plus$-$state tax rate is $30\%.$

To see the effect of flotation costs on Cold Ltuck's after$-$tax cost of debt $($generic$),$ calculate the after$-$tax cost of the firm's debt issue with and without its flotation costs, and select the correct after$-$tax costs $($in percentage form$)$:

After$-$tax cost of debt without flotation cost:

After$-$tax cost of debt with flotation cost:

This is the cost of debt, and it is different from the average cost of capital raised in the past.