Sunrise, Incorporated, is trying to determine its cost of debt. The firm has a debt issue outstanding with 23 years to maturity that is quoted at 96 percent of its face value of $1,000. The issue makes semiannual payments and has a coupon rate of 5 percent annually.

a. What is the companys pre-tax cost of debt?

b. If the tax rate is equal to 21%, what is the companys after-tax cost of debt?