Calculate the after-tax cost of financing

Reference no: EM131962835

Question: 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, 000par value and flotation costs will be $35per bond. The company is taxed at 30%.

Coupon rate Time to Maturity Premium or discount

11% 16 years -230

The after-tax cost of financing using the approximation formula is_____________(Round to two decimal places.)

Reference no: EM131962835

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