Question

Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 13 years to maturity that is quoted at 98 percent of face value. The issue makes semiannual payments and has an embedded cost of 11 percent annually.

  

Required:

(a)	What is the company's pretax cost of debt? (Do not round your intermediate calculations.)
	(Click to select) 10.73%, 11.30%, 11.86%, 11.20%, 11.75%

(b)	If the tax rate is 33 percent, what is the aftertax cost of debt? (Do not round your intermediate calculations.)
	(Click to select) 6.12%, 7.19%, 7.95%, 7.57%, 7.87%

Answer 1