Problem:
Jiminy's Cricket Farm issued a 15-year, 10 percent semiannual bond 4 years ago. The bond currently sells for 91 percent of its face value. The company's tax rate is 35 percent.
Required:
Question 1: What is the pretax cost of debt?
Question 2: What is the aftertax cost of debt?
Note: Please describe comprehensively and provide step by step solution.