After tax cost of debt can best be described as: A) AT k_d= k_d(T- 1) B) AT k_d= (1- k_d) C) AT k_d= k_d(l- T) D) AT k_d= k_d(l+T)

Question

Quizplus · Accepted Answer

The after-tax cost of debt is calculated by adjusting the before-tax cost of debt for the effects of taxes, which is done by multiplying the before-tax cost of debt by (1 - Tax Rate). This is represented in option C as "AT k_d= k_d(l- T)", where "l" likely represents 1 (one), and "T" represents the tax rate. This formula effectively reduces the cost of debt by the tax savings due to interest expense being tax-deductible.

After Tax Cost of Debt Can Best Be Described As