1. Your company has one bond outstanding and this bond is actively traded. This bond has a $1,000 par value, 5.5% coupon (paid annually), and 14 years left to maturity. The bond is currently trading at $971. What is the pretax cost of debt for this company?

2. For the problem above, if the company’s marginal tax rate is 26 percent, what is the after-tax cost of existing debt?

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