Question: a. Using the cost-of-debt approximation formula, determine the pre-tax cost for a bond that sells at $ 925 par value and that pays a coupon

a. Using the cost-of-debt approximation formula, determine the pre-tax cost for a bond that sells at $ 925 par value and that pays a coupon of $ 85 for 20 years. The flotation costs are $ 5 per bond. You will have to show the counts.

b. For the above case, calculate the cost of debt after taxes if the company's tax liability is 40%. You will have to show the counts.

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