What is the? firm after-tax cost of debt on the? bond

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Point a. A bond that has ?$1,000 par value? (face value) and a contract or coupon interest rate of 12 percent. A new issue would have a floatation cost of 8 percent of the ?$1,135 market value. The bonds mature in 5 years. The? firm's average tax rate is 30 percent and its marginal tax rate is 38 percent.

Point b. A new common stock issue that paid a ?$1.40 dividend last year. The par value of the stock is? $15, and earnings per share have grown at a rate of 12 percent per year. This growth rate is expected to continue into the foreseeable future. The company maintains a constant? dividend-earnings ratio of 30 percent. The price of this stock is now ?$26?, but 7 percent flotation costs are anticipated.

Question a. What is the? firm's after-tax cost of debt on the? bond?

__?% ?(Round to two decimal? places.)

Question b. What is the cost of external common? equity?

__% ?(Round to two decimal? places.)

Reference no: EM132488573

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