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Jiminys Cricket Farm issued a bond with 15 years to maturity and a semiannual coupon rate of 4 percent 2 years ago. The bond currently

Jiminys Cricket Farm issued a bond with 15 years to maturity and a semiannual coupon rate of 4 percent 2 years ago. The bond currently sells for 91 percent of its face value. The companys tax rate is 21 percent.

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?

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