What is pretax cost of debt and aftertax cost of debt

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Advance, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 20 years to maturity that is quoted at 108 percent of face value. The issue makes semiannual payments and has a coupon rate of 10 percent annually.

What is Advance's pretax cost of debt?

If the tax rate is 35 percent, what is the aftertax cost of debt?

Reference no: EM13947336

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