Answer:
relevant cost of debt financing to TC, Inc.= 8.75%
Step-by-step explanation:
The yield to maturity is a proxy for a company's cost of capital as it reflects the return that a company provides to its debtholders. Given a yield to maturity equal to 12.5% and a tax rateof 30%, the after tax cost of debt is calculated as :
After tax cost of debt =

The relevant interest rate is thus equal to 8.75% due to the fact that interest is tax deductible.