The dollar cost of debt for John Galt Industries is 8.0%.The firm faces a tax rate of 40% on all income,no matter where it is earned.Galt needs to know its Yen cost of debt.The risk-free interest rates on dollars and yen are r% = 6% and r¥ = 2%,respectively.Galt is willing to assume that capital markets are internationally integrated and that its free cash flows are uncorrelated with the yen-dollar spot rate.Galt's after-tax cost of debt in yen is closest to:

Question

Quizplus · Accepted Answer

A)r_{after-tax wacc} = r_{before tax w}_acc × (1 - T_c)= 8%(1 - 40%)= 4.8% 11ea7cce_3bef_5886_928c_5ff7f5ba9f77_TB1626_11 = 11ea7cce_3bef_a6a7_928c_73622d2176c5_TB1626_11 (1 + 11ea7cce_3bef_cdb8_928c_3127b0bc0653_TB1626_11 )- 1 = 11ea7cce_3bef_f4c9_928c_e1a5a3bdad8e_TB1626_11 (1 + .048)- 1 = 0.008453 or .845%

The Dollar Cost of Debt for John Galt Industries Is