Question $17$

$10$ pts

Barty's issued $$10$ million in long$-$term bonds many years ago that now have eight years remaining until maturity. The bonds have a $7\%$ coupon rate and have a current price of $$1,071\mathrm{.}55.$ Barty's also has $$25$ million in market value of common stock. For cost of capital purposes, what portion of the firm is debt financed and what is the after$-$tax cost of debt, if the tax rate is $35\%?$

$28\mathrm{.}57\%$ debt financed; $1\mathrm{.}91\%$ after$-$tax cost of debt

$30\mathrm{.}00\%$ debt financed; $3\mathrm{.}81\%$ after$-$tax cost of debt

$70\mathrm{.}00\%$ debt financed; $4\mathrm{.}55\%$ after$-$tax cost of debt

$40\mathrm{.}00\%$ debt financed; $2\mathrm{.}93\%$ after$-$tax cost of debt