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Waller Inc. is trying to determine its cost of debt. The firm

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Waller Inc. is trying to determine its cost of debt. The firm

 

Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 9 years to maturity that is quoted at 107 percent of face value. The issue makes semiannual payments and has an embedded cost of 7 percent annually.

 

Required:

 

(a) What is the company’s pretax cost of debt? (Do not round your intermediate calculations.)
(Click to select)  6.22%  5.68%  6.28%  7.20%  5.98%

 

(b) If the tax rate is 34 percent, what is the aftertax cost of debt? (Do not round your intermediate calculations.)
(Click to select)  3.95%  3.37%  4.11%  4.15%  3.75%

 

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