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 109.5 percent of face value. The issue makes semiannual payments and has an embedded cost of 8 percent annually.
Requirement 1: What is ICU's pretax cost of debt? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
Pretax cost of debt _______ %
Requirement 2: If the tax rate is 34 percent, what is the aftertax cost of debt? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
Aftertax cost of debt ________%