$12$

points

The Goodsmith Charitable Foundation, which is tax$-$exempt, issued debt last year at $13$ percent to help finance a new playground

facility in Los Angeles. This year the cost of debt is $15$ percent higher; that is$,$ firms that paid $15$ percent for debt last year will be paying

$17\mathrm{.}25$ percent this year.

a$.$ If the Goodsmith Charitable Foundation borrowed money this year, what would the aftertax cost of debt be$,$ based on its cost last

year and the $15$ percent increase?

Note: Do not round intermediate calculations. Input your answer as a percent rounded to $2$ decimal places.

Aftertax cost of debt

$\%$

b$.$ If the receipts of the foundation were found to be taxable by the IRS $($at a rate of $35$ percent because of involvement in political

activities$),$ what would the aftertax cost of debt be$?$

Note: Do not round intermediate calculations. Input your answer as a percent rounded to $2$ decimal places.