Problem:
A corporate bond has a face value of $1,000 and a coupon rate of 9%. The bond matures in 14 years and has a current market price of $946. If the corporation sells more bonds it will incur flotation costs of $26 per bond. If the corporate tax rate is 35%,
Required:
Question: What is the after-tax cost of debt capital?
Note: Show all workings.