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What is nyala cost of debt for the new issue

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Reference no: EM132887472

Problem 1: Nyala 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%. Nyala has an income tax rate of 20%. What is Nyala's cost of debt for this new issue?

a) 5.60%
b) 5.83%
c) 5.89%
d) 7.50%

Reference no: EM132887472

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