Flotation costs and the cost of debt In March of 2020 PepsiCo, Inc. (PEP) sold $750 million worth of 30-year 4.75% coupon bonds that pay semi-annual interest. At the time the bonds were issued, the...

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Extracted text: Flotation costs and the cost of debt In March of 2020 PepsiCo, Inc. (PEP) sold $750 million worth of 30-year 4.75% coupon bonds that pay semi-annual interest. At the time the bonds were issued, the market paid $992.76 per bond and the flotation cost was $18.14 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? a. Ignoring flotation cost, Pepsi's before-tax cost of debt is 4.80 %. (Round to two decimal places.) Ignoring flotation cost, Pepsi's after-tax cost of debt is 3.79 %. (Round to two decimal places.) b. Considering flotation cost, Pepsi's before-tax cost of debt is %. (Round to two decimal places.)