Ladder Works has debt outstanding with a coupon rate of 6 percent and a yield to maturity of 6.8 percent.What is the aftertax cost of debt if the tax rate is 21 percent? Assume all interest is tax deductible.

Question

Quizplus · Accepted Answer

The aftertax cost of debt is the yield to maturity multiplied by (1 - tax rate). In this case, the aftertax cost of debt is 6.8% * (1 - 21%) = 5.37%.

Ladder Works Has Debt Outstanding with a Coupon Rate of 6