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Forsythe's Fancies has two issues of debt outstanding. The first is a 9% annual coupon bond with face value of $20 million, a maturity of

Forsythe's Fancies has two issues of debt outstanding. The first is a 9% annual coupon bond with face value of $20 million, a maturity of 10 years, and a yield to maturity of 10%. The second bond has a maturity of 15 years with coupons paid annually at a rate of 10%. The face value of issue is $25 million, and is currently selling at 94%. The firm's tax rate is 35%.

1) What is the before-tax and after tax cost of debt?

2) Give a reason that the second bond issuance has a higher YTM, and explain your reason.

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