Before-tax cost of debt and after-tax cost of debt David Abbot is buying a new house, and he is taking out a 30-year mortgage. David will borrow $200,000 from a bank, and to repay the loan he will make 360 monthly payments (principal and interest) of $1,199.10 per month over the next 30 years. David can deduct interest payments on his mortgage from his taxable income, and based on his income, David is in the 30% tax bracket a. What is the before-tax interest rato (per year) on David's loan? b. What is the after-tax interest rate that David is paying? a. The beforo-tax, interest rate (por year) on David's loan is % (Round to two decimal places.) b. The aftar-ax interest rate that David is paying is ]%. (Round to two decimal placra.) Since retained earnings is a more expensive source of financing than debt and proferred stock, the weighted average cost of capital will fall once retained earings have been exhausted. O True False