A company borrows money at the rate of 10% and has a tax rate of 25%.What is their after-tax cost of borrowing?

Name: A company borrows money at the rate of 10% and has a tax rate of 25%.What is their after-tax cost of borrowing?
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Question

Quizplus · Accepted Answer

The after-tax cost of borrowing can be calculated as follows:
After-tax cost of borrowing = cost of borrowing * (1 - tax rate)
= 10% * (1 - 25%)
= 10% * 0.75
= 7.5%
Therefore, the answer is option B) 7.5%.

A Company Borrows Money at the Rate of 10% and Has