1. Lee Airlines plans to issue 12-year bonds with a par value of $1,000 that will pay $70 every six months. The bonds have a market price of $960. Flotation costs on new debt will be 7%. If the firm is in the 35% marginal tax bracket, what is the post tax cost of new debt?
   1. Apply the appropriate mathematical model to solve the problem.
   2. Calculate the correct solution to the problem. Submit all answers as percentages and round to two decimal places.