Answer Happy

Joy, Inc. is planning on issuing new bonds to raise capital.Joy’s investment banking firmindicates that different maturities will carry different couponrates and thus sell at differentprices. Each bond issue, however, will have a $1000 par value, withflotation costs of $50 perbond. Joy’s tax rate is 21%.a. Calculate Joy’s current required rate of return of theirlong-term debt for each of thefollowing alternatives.
b. Assume that Joy, Inc. plans on issuing new long-term debt tosell at par. Calculate thebefore-tax and after-tax cost of debt for each alternative.