Question: Question 2 (2 points) Costly Corporation plans a new issue of bonds with a par value of $1000, a maturity of 26 years, and an

Question 2 (2 points) Costly Corporation plans a new issue of bonds with a par value of $1000, a maturity of 26 years, and an annual coupon rate of 16.0%. Flotation costs associated with a new debt issue would equal 3.0% of the market value of the bonds. Currently, the appropriate discount rate for bonds of firms similar to Costly is 14.0%. The firm's marginal tax rate is 50%. What will the firm's true cost of debt be for this new bond issue? 18.53% 14.45% 16.50% 8.25% 7.23%

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