A firm has issued $20 million in long-term bonds that now have 10 years remaining until maturity.The bonds carry an 8% annual coupon but are selling in the market for $877.10.The firm also has $45 million in market value of common stock.For cost of capital purposes, what portion of the firm is debt financed and what is the after-tax cost of debt?

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The Answer of A firm has issued $20 million in long-term bonds that now have 10 years remaining until maturity.The bonds carry an 8% annual coupon but are selling in the market for $877.10.The firm also has $45 million in market value of common stock.For cost of capital purposes, what portion of the firm is debt financed and what is the after-tax cost of debt?

A Firm Has Issued $20 Million in Long-Term Bonds That