Problem:
ICU Window, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with ten years to maturity that is quoted at 117.5 percent of face value. The issue makes semiannual payments and has an embedded cost of 11.2 percent annually.
Required:
Question 1: What is ICU's pretax cost of debt?
Question 2: If the tax rate is 30 percent, what is the aftertax cost of debt?
Note: Please provide through step by step calculations.