Calculating Cost of Debt Advance plc is trying to determine its cost of debt. The firm has a debt issue outstanding with 7 years to maturity that is quoted at 92 per cent of face value. The issue makes semi-annual payments and has a coupon rate of 4 per cent annually.

What is Advance’s pre-tax cost of debt? If the tax rate is 24 per cent, what is the after-tax cost of debt? Assume the face value of the debt is €1,000.