Drogo, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 18 years to maturity that is quoted at 108 percent of face value. The issue makes semiannual payments and has an embedded cost of 4 percent annually.
What is the company’s pretax cost of debt? .....rounded to 2 decimal places
Pretax cost of debt %______________
If the tax rate is 35 percent, what is the aftertax cost of debt? rounded to 2 decimal places
Aftertax cost of debt %________________