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11-2 (Individual or component costs of capital) Compute the cost of the following:

c. A bond that has a $1,000 par value and a contract, or coupon, interest rate of 12 percent. A new issue would net the company 90 percent of the $1,150 market value. The bonds mature in 15 years, the firm's average tax rate is 30 percent, and its marginal tax rate is 34 percent.

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