Flotation costs and the cost of debt​ In March of 2020​ PepsiCo, Inc.​ (PEP) sold​ $750 million worth ofb 20​-year 3.75% coupon bonds that pay​ semi-annual interest. At the time the bonds were​ issued, the market paid ​$991.72 per bond and the flotation cost was ​$17.59 per bond.​ Pepsi's corporate tax rate is 21​%. a. Ignoring flotation​ costs, what is​ Pepsi's before-tax and​ after-tax costs of​ debt? b. Considering flotation​ costs, what is​ Pepsi's before-tax and​ after-tax costs of​

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter11: Determining The Cost Of Capital
Section: Chapter Questions
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Flotation costs and the cost of debt​  

In March of 2020​ PepsiCo, Inc.​ (PEP) sold​ $750 million worth ofb 20​-year 3.75% coupon bonds that pay​ semi-annual interest. At the time the bonds were​ issued, the market paid ​$991.72 per bond and the flotation cost was ​$17.59 per bond.​ Pepsi's corporate tax rate is 21​%.

a. Ignoring flotation​ costs, what is​ Pepsi's before-tax and​ after-tax costs of​ debt?
b. Considering flotation​ costs, what is​ Pepsi's before-tax and​ after-tax costs of​ debt?
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