1. The coupon rate on an issue of debt is 11%. The yield to maturity on this issue is 11%. The corporate tax rate is 38%. What would be the approximate after-tax cost of debt for a new issue of bonds?
5.47%
8.27%
6.82%
8.97%
2. A firm's preferred stock pays an annual dividend of $5, and the stock sells for $86. Flotation costs for new issuances of preferred stock are 8% of the stock value. What is the after-tax cost of preferred stock if the firm's tax rate is 37%?
8.47
4.97
6.32
7.77