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A firm sold a 30-year bond issued two years ago. The bond has a 5.25% annual coupon and a face value of $1,000. If the

A firm sold a 30-year bond issued two years ago. The bond has a 5.25% annual coupon and a face value of $1,000. If the current market price of the bond is $972.32 and the tax rate is 35%.

a.What is the pre-tax cost of debt?

b.What is the after tax-cost of debt?

c.Which is more relevant to a firm's cost of capital, and why?

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