If the before-tax cost of debt is 6 percent and the after-tax cost of debt is 3.6 percent, the marginal tax rate must be 30 percent.

Name: If the before-tax cost of debt is 6 percent and the after-tax cost of debt is 3.6 percent, the marginal tax rate must be 30 percent.
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Quizplus · Accepted Answer

The marginal tax rate is 40 percent because the after-tax cost of debt is calculated as the before-tax cost of debt multiplied by (1 - tax rate), so 6% * (1 - tax rate) = 3.6%, solving for the tax rate gives 0.4 or 40%.

If the Before-Tax Cost of Debt Is 6 Percent and the After-Tax