Waller, Inc., is trying to determine its cost of debt. The firm has one bond issue outstanding with 14 years to maturity. The bond's price is quoted at 103 percent of face value. The issue pays a 8.00% annual coupon in semi-annual installments, and has a yield to maturity of 7.65%.
Required:
(a) What is the company's pre-tax cost of debt? (Do not round your intermediate calculations.)
(Click to select) 8.03%8.20%7.26%7.95%7.65%
(b) If the tax rate is 35 percent, what is the after-tax cost of debt? (Do not round your intermediate calculations.)
(Click to select) 5.17%4.97%5.22%4.72%3.95%