1. A bond has a $1000 par value (face value) and acontract or coupon interior ra

1. A bond has a $1000 par value (face value) and acontract or coupon interior rate of 8%. A new issue would have aflotation cost of 5% of the market value. The bonds mature in 10years. The firms average tax rate is 28% and its marginal tax rateis 39%. The current price is $1100. What is the after tax cost ofdebt?2. A new common stock issue paid a $1.50 dividend last year.The par value of the stock is $25 and earnings per share havegrown at a rate of 3% per year. This growth rate is expected tocontinue into the foreseeable future. The company maintains aconstant dividend/earnings ratio of 40%. The price of this stock isnow $30 but 4% flotation costs are anticipated. What is the costof new common equity?