Laurel, Inc., has debt outstanding with a coupon rate of 5.9 % and a yield to...
Laurel, Inc., has debt outstanding with a coupon rate of 5.9 % and a yield to maturity of 7.1 %. Its tax rate is 40 %. What is Laurel's effective (after-tax) cost of debt? NOTE: Assume that the debt has annual coupons. Note: Assume that the firm will always be able to utilize its full interest tax shield.
Homework Answers
after-tax cost of debt=yield to maturity*(1-tax rate)
=7.1*(1-0.4)
which is equal to
=4.26%
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Laurel, Inc., has debt outstanding with a coupon rate of 5.9 %
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