Question 3 A company issued a 30 -year, 4.5 percent semiannual bond three years ago. The bond currently sells for 104 percent of its face value. The company's tax rate is 22 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 aftertax cost of debt? Why? Input Area: Settlement Maturity Coupon rate Price (\% of par) Redemption (\% of par) Payments per year Tax rate Output Area: a. Pretax cost of debt b. Aftertax cost of debt c. For the firm in Question 3, suppose the book value of the debt issue is $75 million. In addition, the company has a second debt issue on the market, a zero coupon bond with eight years left to maturity; the book value of this issue is $30 million and the bonds sell for 81 percent of par. What is the company's total book value of debt? The total market value? What is the best estimate of the aftertax cost of debt now? Input Area: Book value of debt issue (1) Second issue Settlement date Maturity date Annual coupon rate Coupons per year Price (\% of par) Redemption (\% of par) Tax rate Book value debt issue (2) Output Area: Book value of debt Market value of first bond Market value of second bond Market value of debt Pretax cost of second issue Aftertax cost of second issue Weight of first bond Weight of second bond Aftertax cost of debt