Compute the cost for the following source of financing a A $100 par value bond with a market price of $97

Question

Compute the cost for the following source of financing:

a. A $100 par value bond with a market price of $97

and a coupon interest rate of 10%. Costs for a new issue would be approximately 5%. The bonds mature in ten years and the corporate tax rate is 30%. Estimate the cost of debt before tax.

Finance