Jiminy's Cricket Farm issued a 30-year, 8 percent coupon bond 4 years ago. The bond makes semi-annual coupon payments and sells for 87 percent of its face value. The face value of the debt issue is $24 million and the yield to maturity is 9.335%. Note: YTM for coupon bonds is quoted as an APR with semi-annual compounding.

In addition, the company has a second debt issue on the market, a zero coupon bond with 4 years left to maturity; the face value of this issue is $84 million and the bonds sell for 75 percent of face value. Note: Zero-coupon bonds only make one payment: face value which is paid at maturity.

A) What is the pre-tax cost of debt for the zero coupon bond? Report this as an APR with semi-annual compounding.

B) The company's tax rate is 33 percent. What is the company's after-tax cost of debt? Report this as an APR with semi-annual compounding.

4.98% 5.61% 3.91% 5.89% 5.24%