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Calculating Cost of Debt. ICU Window, Inc., is trying to determine its cost of
debt. The firm has a debt issue outstanding with seven years to maturity that
is quoted at 108 percent of face value. The issue makes semiannual payments and
has an embedded cost of 6.1 percent annually. What is ICU’s pretax cost of
debt? If the tax rate is 38 percent, what is the after-tax cost of debt?
