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Problem: Olympic Sports has two issues of debt outstanding. One is an 8% coupon bond with a face value of $21 million, a maturity of 10 years, and a yield to maturity of 9%. The coupons are paid annually. The other bond issue has a maturity of 15 years, with coupons also paid annually, and a coupon rate of 9%. The face value of the issue is $25 million, and the issue sells for 93% of par value. The firm's tax rate is 30%
Required:
Question 1: What is the before-tax cost of debt for Olympic?
Question 2: What is Olympic's after-tax cost of debt?
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