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a firm has $ 8 Billion in debt outstanding with a yield to maturity of 4%. The firm pays taxed at the rate of 36%. What...

a firm has $ 8 Billion in debt outstanding with a yield to maturity of 4%. The firm pays taxed at the rate of 36%. What is the firms effective (after-tax) cost of debt?

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Answer #1

After Tax cost of Debt = YTM (1-Tax Rate )

= 4% * ( 1 - 0.36)

= 4% * 0.64

= 2.56%

AFter Tax Cost of Debt is 2.56%

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