Sunrise, Incorporated, is trying to determine its cost of debt. The firm has a debt issue outstanding with 23 years to maturity that is quoted at 93 percent of face value. The issue makes semiannual payments and has an embedded cost of 7 percent annually.
a.
What is the company’s pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b.
If the tax rate is 22 percent, what is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
