Question: Waller, Inc., is trying to determine its cost of d…
Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 14 years to maturity that is quoted at 100 percent of face value. The issue makes semiannual payments and has an embedded cost of 11 percent annually. Note the embedded cost refers to the coupon rate.
Required:
(a) What is the company’s pretax cost of debt? (Do not round your intermediate calculations.)
(b) If the tax rate is 35 percent, what is the after tax cost of debt? (Do not round your intermediate calculations.)
