Company A is considering the issuance of a 15 year bond with a 9% coupon rate and issuance costs of $23 for each bond. The tax rate is 35%. Based on this information, the cost of debt after taxes of this bond is equal to:

-

Statement I:

For companies that maintain consistency in their retention and payout ratios and earn a variable return on equity, the growth rate will approximate a constant.

Statement II:

The residual claim on assets, means that the owners of preferred stocks have a residual claim after other claim holders are paid.

Group of answer choices

Statement 1 is incorrect; statement 2 is correct

Both statements are correct

Statement 1 is correct; statement 2 is incorrect

Both statements are incorrect