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Suppose we have a bond issue currently outstanding that has 25 years left to maturity. The coupon rate is 9% and coupons are paid semiannually.

Suppose we have a bond issue currently outstanding that has 25 years left to maturity. The coupon rate is 9% and coupons are paid semiannually. The b di tl lli f $900 h th fi ti fl t ti bond is currently selling for $900, however, the firm must incur a floatation cost of 2% ($18) of the market price. Par value of the bond is $1000. What is the after-tax cost of debt?

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