What is the pretax cost of debt for a firm in the 35% tax bracket that has a 9% after-tax cost of debt?

Name: What is the pretax cost of debt for a firm in the 35% tax bracket that has a 9% after-tax cost of debt?
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Question

Quizplus · Accepted Answer

To find the pretax cost of debt, we can use the formula: 
pre-tax cost of debt = after-tax cost of debt / (1 - tax rate)
Substituting the given values: 
pre-tax cost of debt = 9% / (1 - 0.35) = 13.85% 
Therefore, the answer is choice C.

What Is the Pretax Cost of Debt for a Firm