A firm's bond have a coupon rate of 8.80%.They currently have a yield-to-maturity of 9.75%.if the firm's tax rate is 25%,its after-tax cost of debt is _______.

Name: A firm's bond have a coupon rate of 8.80%.They currently have a yield-to-maturity of 9.75%.if the firm's tax rate is 25%,its after-tax cost of debt is _______.
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Question

Quizplus · Accepted Answer

The after-tax cost of debt formula is: 
After-tax cost of debt = Pretax cost of debt x (1 - Tax rate) 
= 9.75% x (1 - 0.25) 
= 7.31% 
Therefore, the correct answer is C.

A Firm's Bond Have a Coupon Rate of 8