Viserion, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 15 years to maturity that is quoted at 108 percent of face value. The issue makes semiannual payments and has an embedded cost of 7 percent annually.

A. What is the company's pretax cost of debt?

6.17%

7.20%

6.48%

5.87%

6.42%

B. If the tax is 37 percent, what is the aftertax cost of debt?

3.16%

3.70%

3.89%

4.05%

4.08%