In an effort to provide some structure to the value perspective, David Garvin of the Harvard Business School identified eight di
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Answer:After-tax cost of debt capital = 4.78%
Explanation:
Cost of debt (After-tax):
=
(1 – tax rate)
Where,
= After tax cost of debt
F = Floatation cost
= Net proceeds
Net proceeds = Bond face value ± Premium or Discount
Net proceeds: $ 1000 - $ 15 = $ 985
Flotation cost = $ 36
Tax rate 34% or 0.34
Hence, after tax cost of debt = (1 - 0.34)
= 4.778 % (approx.)
i.e. 4.78%