Q$7.$ Calculating Cost of Debt. Jiminy' s Cricket Farm issued a $23-$year, $6\mathrm{.}5$ percent semiannual bond.

The bond currently sells for $107$ percent of its face value. The company' s tax rate is $35$ 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? Why?

Q$8.$ Calculating Cost of Debt. For the firm in Problem $7,$ suppose the book value of the debt issue is

$$105$ million. In addition, the company has a second debt issue, a zero coupon bond with $10$ years

left to maturity; the book value of this issue is $$75$ million, and it sells for $62\mathrm{.}5$ percent of par. What

is the total book value of debt? The total market value? What is the aftertax cost of debt now?