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Drogo, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 12 years to maturity that is quoted

Drogo, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 12 years to

maturity that is quoted at 110 percent of face value. The issue makes semiannual payments and has an

embedded cost of 6 percent annually.

What is the companys pretax cost of debt?

If the tax rate is 35 percent, what is the aftertax cost of debt?

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