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MINDTAP Q Search this Ch 09: Assignment. The Cost of Capital What do lenders require, and what kind of debt costs the company? The cont of debt that is relevant when companies are evaluating new investment projects is the marginal cost of the new debt to be raised to finance the new project Consider the case of Cold Duck Brewing Company (Cold Duck): Cold Duck Brewing Company is considering Issuing a new 20-year debt issue that would pay an annual coupon payment of $50. Each bond in the issue would carry a $1,000 per value and would be expected to be sold for a price equal to its par value Cold Ducks CFO has pointed out that the form would incora flotation cost of 1 when initially issuing the bond issue. Remember the Rotation costs will be the proceeds the firm will receive after issuing its new bonds. The firm's marginal federalihusstate tax rates 30% to see the effect of flotation costs on Cold Ducks after tax cost of dete (merk), calculate the after tax cost of the firm's debt have with and without us flotation costs, and select the correct after tax costs in percentage form) Altertax cost of debt without rotation costi After a cost of debt with Rotation cost: This is the cost of debit, and it is different from the average cost of capital rased in the past