What is nyala cost of debt for this new issue

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Question - 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: EM132979351

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