(Individual or component costs of capital) Compute the costs for the following sources of financing:

a. A $ 1 ,000 par value bond with a market price of $ 970 and a coupon interest rate of 11 percent. Flotation costs for a new issue would be approximately 9 percent. The bonds mature in 7 years and the corporate tax rate is 36 percent.

b. A preferred stock selling for $ 102 with an annual dividend payment of $ 7. The flotation cost will be $ 5 per share. The company's marginal tax rate is 30 percent.

c. Retained earnings totaling $ 4.8 million. The price of the common stock is $ 67 per share, and dividend per share was $ 9.39 last year. The dividend is not expected to change in the future.

d. New common stock for which the most recent dividend was $ 3.29. The company's dividends per share should continue to increase at a growth rate of 11 percent into the indefinite future. The market price of the stock is currently $ 58; however, flotation costs of $ 7 per share are expected if the new stock is issued.

a. What is the firm's after-tax cost of debt on the bond?