Information regarding a bond loan to be issued by firm Z:

Number of bonds: 300.000;

Face value (par value): 5 euro;

Issuing price: 5% below face value;

Issuing costs: 2% over issuance value;

Repayment at face value;

Coupon rate: 5% per year;

Annual coupons;

Maturity of the loan: 5 years.

Tax rate: 25%

Determine the cost of capital of this bond loan.

The solution should be: kd (after-tax) = 5%.