Viserion, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 16 years to maturity that is quoted at 107 percent of face value. The issue makes semiannual payments and has an embedded cost of 4 percent annually.

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

b. If the tax rate is 25 percent, what is the aftertax cost of debt?