Problem $13-3$ Calculating Cost of Debt

Jiminy's Cricket Farm issued a $30-$year, $4\mathrm{.}8$ percent semiannual bond $3$ years ago. The

bond currently sells for $95$ percent of its face value. The company's tax rate is $23$

percent.

a$.$ What is the pretax cost of debt? $($Do not round intermediate calculations and enter

your answer as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

b$.$ What is the aftertax cost of debt? $($Do not round intermediate calculations and enter

your answer as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

a$.$ Pretax cost of debt

b$.$ Aftertax cost of debt

$\%$

$\%$

c$.$ Which is more relevant, the pretax or the aftertax cost of debt?

Aftertax cost of debt

Pretax cost of debt