Flotation costs and the cost of debt In March of 2020 PepsiCo, Inc. (PEP) sold $750 million worth of 40-year 4.75% coupon bonds that pay semi-annual interest. At the time the bonds were issued, the market paid $1,005.59 per bond and the flotation cost was $17.38 per bond. Pepsi's corporate tax rate is 21%. a. Ignoring flotation costs, what is Pepsi's before-tax and after-tax costs of debt? b. Considering flotation costs, what is Pepsi's before-tax and after-tax costs of debt? a. Ignoring flotation cost, Pepsi's before-tax cost of debt is 5.04 %. (Round to two decimal places.) Ignoring flotation cost, Pepsi's after-tax cost of debt is 3.98 %. (Round to two decimal places.) b. Considering flotation cost, Pepsi's before-tax cost of debt is 5.15 %. (Round to two decimal places.) Considering flotation cost, Pepsi's after-tax cost of debt is 4.07 %. (Round to two decimal places.)