A company plans to issue 15-year debentures with a face value of $1,000 each with coupons at an annual interest rate of 12%. Because of annual interest rates, the company decides to sell the bonds at $1,010 each. Flotation costs are $30 per bond and the tax rate paid by the company is 32%.

Using the internal rate of return method, calculate the before- and after-tax costs of this debt.