Waller inc. is trying to determine its cost of debt. the, Ask an Expert

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Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 15 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 (note: this means that the coupon rate is 7% APR). What is the pretax cost of debt as an APR? If the tax rate is 35%, what is the aftertax cost of debt?

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