a tax exempt company issued debt last year at 14 percent to help get a new playground. this year the debt is 20 percent higher; that is; firms that paid paid 16 percent for debt last year will be paying 19.20 percent this year.

a. if they borowed money this year what would the aftertax cost of debt be, based on their cost last yeat and the 20 percent increase?

b. if the receipts of the foundation were found to be taxable by the IRS (at a rate of 35%) what would the aftertax cost of debt be?