Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 14 years to maturity that is quoted at 93 percent of face value. The issue makes semiannual payments and has an embedded cost of 9 percent annually.
A) What is the company’s pre tax cost of debt?
B) If the tax rate is 33%, what is the aftertax cost of debt?
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