Before and after-tax cost of debt financing

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timer Asked: Sep 25th, 2015

Question Description

1. Black Hill Inc. sells $100 million worth of 23-year to maturity 6.50% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $985 for each $1,000 bond. What is the before-tax cost of capital for this debt financing?

Round the answer to two decimal places in percentage form. 


2. Great Seneca Inc. sells $100 million worth of 25-year to maturity 13.76% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $992 for each $1,000 bond. The firm's marginal tax rate is 30%. What is the after-tax cost of capital for this debt financing?

Round the answer to two decimal places in percentage form.


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