Flotation costs and the cost of debt. In March of $2020$ PepsiCo, Inc. $($PEP$)$ sold $$750$ million worth of $40-$year $3\mathrm{.}875\%$ coupon bonds that pay semi$-$

annual interest. At the time the bonds were issued the market paid $$994\mathrm{.}20$ per bond and the flotation cost was $$18\mathrm{.}76$ 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 costs, what is Pepsi's before$-$tax and after$-$tax costs of debt?

Par value

Coupon rate

Semi$-$annual coupon payment

Years to maturity

Selling price per bond

Annual before$-$tax cost of debt

Annual after$-$tax cost of debt

b$.$ Considering flotation costs, what is Pepsi's before$-$tax and after$-$tax costs of debt?

Flotation cost per bond

Par value

Coupon rate

Semi$-$annual coupon payment

Years to maturity

Net proceed per bond

Annual before$-$tax cost of debt

Annual after$-$tax cost of debt