The cost of debt

Save Homework: Chapter 9 Homework Score: 0 of 1 pt 2 of 6 (5 complete) X P9-5 (similar to) HW Score: 33.33%, 2 of 6 pts Question Help The cost of debt Gronseth Drywall Systems, Inc., is in discussions with its investment bankers regarding the issuance of new bonds. The investment banker has informed the firm that different maturities will carry different coupon rates and sell at different prices. The firm must choose among several alternatives. In each case, the bonds will have a $1,000 par value and flotation costs will be $40 per bond. The company is taxed at 23%. Use the approximation formula to calculate the after-tax cost of financing with the following alternative. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Coupon rate 8% Time to maturity 16 years Premium or discount $300 The after-tax cost of financing using the approximation formula is %. (Round to two decimal places.) Enter your answer in the answer box and then click Check Answer. All parts showing Clear All Check