$7.$ Cost of Debt:

Suppose that

$-$ H$.$ Motors issued a $30-$year, $7\%$ semiannual bond $7$ years ago.

$-$ The bond currently sells for $95\%$ of its face value.

$-$ The company$$s tax rate is $38\%$

What is the pre$-$tax cost of debt?

Answer:

What is the after$-$tax cost of debt?

Answer:

Which one is more relevant?

Answer: