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Blue Mountain Co. issued a 20-year, 10% semiannual bond 5 years ago. The bond currently sells for 115 percent of its face value. The companys

Blue Mountain Co. issued a 20-year, 10% semiannual bond 5 years ago. The bond currently sells for 115 percent of its face value. The companys tax rate is 35%.

a. What is the pretax cost of debt?

b. What is the aftertax cost of debt?

c. Which is more relevant, the pretax or the aftertax cost of debt? Why?

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