Subject:- Finance (Individual or component costs of capital) Compute the cost of the following:a. A bond that has $1,000 par value (face value) and a contract or coupon interest rate of 8percent. A new issue would have a floatation cost of 6 percent of the $1,140 market value. Thebonds mature in 14 years. The firm's average tax rate is 30 percent and its marginal tax rate is24 percent.b. A new common stock issue that paid a $1.30 dividend last year. The par value of the stockis $15, and earnings per share have grown at a rate of 9 percent per year. This growth rate isexpected to continue into the foreseeable future. The company maintains aconstant dividend-earnings ratio of 30 percent. The price of this stock is now $23, but 9 percentflotation costs are anticipated.c. Internal common equity when the current market price of the common stock is $44. Theexpected dividend this coming year should be $3.10, increasing thereafter at an annual growthrate of 9 percent. The corporation's tax rate is 24 percent....a. What is the firm's after-tax cost of debt on the bond?I% (Round to two decimal places.)

The fees incurred while issuing new debt or securities are known as flotation costs. It is given to…

Answered: a. A bond that has $1,000 par value…

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