Calculating Cost of Debt:
Shanken Corporation issued a 30 year, 7% semiannual bond 7 years ago. The bond currently sells for 108% of its face value. The company's tax rate is 35%.
A. What is the pretax cost of debt?
B. What is the aftertax cost of debt?
C. Which is more relevant, the pretax or the aftertax cost of debt? Why?
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