What is the expected cost of new debt, Financial Accounting

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What is the expected cost of new debt

Response to the following problem:

The Oshkosh Travel Company is considering issuing additional debt. They wish to use the yield on their existing debt as a guide to the cost of new debt. They currently have a 5% coupon bond, paying interest semiannually, that matures in ten years and has a current market price of 80, or $800 per $1,000 face value bond. If Oshkosh's marginal tax rate is 30%, what is their expected cost of new debt?

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Financial Accounting: What is the expected cost of new debt

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