J&R Renovation, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 16 years to maturity that is quoted at 106 percent of face value. The issue makes semiannual payments and has a coupon rate of 6 percent annually. What is the company's pretax cost of debt?
If the tax rate is 35 percent, what is the aftertax cost of debt?
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