Volk believes that GST could issue 20 years debt today with a coupon rate of 8%. The firm has placed many issues in the capital markets during the last 10 years, and its debt flotation cost are currently estimated to be 4% of the issue's value. GST's federal-plus -tax rate is 40%.
What is the total dollar call premium required to call the old issue?
What is the net after tax cost of the call?
What is the floation cost on the new issue?