The procedure to determine the after-tax cost of debt requires that the semi-annual coupon rate be multiplied by one minus the corporate marginal tax rate and then multiplied by two.

Question

Quizplus · Accepted Answer

The procedure to determine the after-tax cost of debt involves multiplying the annual interest expense by one minus the corporate marginal tax rate, not adjusting the semi-annual coupon rate as described. The multiplication by two is not a standard part of calculating the after-tax cost of debt; it seems to mistakenly apply to adjusting for semi-annual payments, which is not relevant in this context.

The Procedure to Determine the After-Tax Cost of Debt Requires