B. 12.30%, 7.38%
Step-by-step explanation:
Cost of debt - the return that a company provides to its debt-holders and creditors
![PV = CF [{(1)/(r) - (1)/(r(1 + r)^(n) ) ] + (FV)/((1 + r)^(n) )](https://img.qammunity.org/2021/formulas/business/college/upkgm6bbdmdubrcrykk23x2uce8efz71y4.png)
PV = present value = current value of future cash flow
FV = future value
CF = cash flow
R = payment
r = rate of interest
n = number of payments
Cash flows from the firm’s point of view over the maturity of the bond
= 980
= - 120
= - 1000
Before Tax
![PV = CF [{(1)/(r) - (1)/(r(1 + r)^(n) ) ] + (FV)/((1 + r)^(n) )](https://img.qammunity.org/2021/formulas/business/college/upkgm6bbdmdubrcrykk23x2uce8efz71y4.png)
Net proceeds =

Cash Flows = CF = - 120
n = 15
FV = - 1000
r = 12.30%
After Tax
After-Tax Cost of Debt = Before-Tax Cost of Debt × (1 – Tax Rate)
40%

= 12.30 (1 - 0.4)
= 7.38%