Homework #3 7) Pullman Corp. has issued $1000 par value bonds with 10 years to maturity. The bonds were sold at a deep discount price of S615 each. The bonds are zero-coupon. The company incurred flotation cost of 6% on these bonds. The company has a tax rate of 34%. Compute the after-tax cost of debt to the firm. If the bonds are callable in 6 years at a call price of $1010, and the bonds are expected to be called at that time, compute the after-tax cost of the debt to the firm. a) b)