After tax cost of debt

CFA Level I FRA
#1

5 years ago, the firm issued $10 in debt at par with a coupon rate of 20%. The firm has now decided to issue another $10 in debt with a coupon rate of 10% at par. The firm has no other debt outstanding and a tax rate of 40%. The appropriate after-tax cost of debt is:

a) 18%

b) 6%

c) 12%

OA is B but I chose a. I thought that I would average the yields and then calculate after-tax, which is wrong. Can someone please explain why this is wrong?

I’d appreciate any help.

#2

each year they pay $2 on the old debt - and in 5 years that old debt is no longer present now.

so all that matters is the new debt issued. So 10% (1-0.4) = 6%

#3

The cost of capital is the cost of NEW financing. So, while the firm issued debt at a 20% YTM in the past, that’s not relevant - only that it will issue at a YTM of 10% NOW.