Olympic Sports has two issues of debt outstanding. One is a 9 percent coupon bond with a face value of $20 million, a maturity of 10 years, and a yield to maturity of 10 percent. The coupons are paid annually. The other bond issue has a maturity of 15 years, with coupons also paid annually, and a coupon rate of 10 percent. The face value of the issue is $25 million, and the issue sells for 94 percent of par value. The firm's tax rate is 35 percent.
a) What is the before-tax cost of debt for Olympic?
b) What is Olympic's after-tax cost of debt?