Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 13 years to maturity that is quoted at 103 percent of face value. The issue makes semiannual payments and has an embedded cost (i.e. a coupon rate as an APR) of 7 percent annually.

Required:

(a)	What is the company's pre-tax cost of debt as an APR? (Do not round your intermediate calculations.)
	a. 6.65% b. 7.20% c. 6.32% D. 6.92% e. 6.98%

(b)	If the tax rate is 36 percent, what is the after-tax cost of debt as an APR? (Do not round your intermediate calculations.)
	a. 4.26% b. 3.23% c. 4.47% d. 4.04% e. 4.43%