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What is agatas cost of debt for this new issue

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Reference no: EM132982199

Question - Agata Inc. is considering issuing bonds to the market to raise $3.5 million. The bonds have a 9% coupon rate, payable semi-annually. Currently, the yield on these bonds is 7%. The investment dealer handling the issue has stated that the percentage before-tax flotation costs will be 5%. Agata has an income tax rate of 20%. What is Agatas cost of debt for this new issue?

a) 7.50%

a) 5.60%

b) 5.83%

d) 5.89%

Reference no: EM132982199

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