1. 6.

Calculating cost of debt [LO 14.2] Pambuka Fisheries Limited is trying to determine its cost of debt. The firm has a debt issue outstanding with 23 years to maturity that is quoted at 103 per cent of face value. The issue makes semiannual payments and has an embedded cost of 6 per cent annually. What is the company’s pretax cost of debt? If the tax rate is 30 per cent, what is the after-tax cost of debt?