A firm, pays no tax, issued debt last year at 8 percent to help finance a new playground facility in Los Angeles. This year the cost of debt is 20 percent higher; that is, firms that paid 10 percent for debt last year will be paying 12.00 percent this year.

a. If the firm borrowed money this year, what would the aftertax cost of debt be, based on their cost last year and the 20 percent increase? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

b. If the receipts of the foundation were found to be taxable (at a rate of 35 percent because of involvement in political activities), what would the aftertax cost of debt be? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)