ICU Window, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with eight years to maturity that is quoted at 110.5 percent of face value. The issue makes semiannual payments and has an embedded cost of 8.4 percent annually.

Requirement 1:

What is ICUs pretax cost of debt?

	3.34%
	10.50%
	6.68%
	6.51%
	8.40%

Requirement 2:

If the tax rate is 38 percent, what is the aftertax cost of debt?

	4.14%
	5.21%
	2.07%
	4.04%
	6.51%

References