The after-tax cost of debt generally increases when the market rate of interest increases.

Name: The after-tax cost of debt generally increases when the market rate of interest increases.
Brand: Quizplus
Rating: 4.8 (47 reviews)

Question

Quizplus · Accepted Answer

The after-tax cost of debt is calculated by taking the interest rate on the debt and adjusting it for the tax savings due to interest expense deductions. When the market rate of interest increases, the nominal cost of new debt increases. Even after adjusting for taxes, this results in a higher after-tax cost of debt.

The After-Tax Cost of Debt Generally Increases When the Market