On January 1, 2013 Bluefield Co. issued $100,000 of 10%, 20-year bonds. If Bluefield's tax rate is 40%, the after-tax cost of borrowing related to these bonds for 2013 is:

Name: On January 1, 2013 Bluefield Co. issued $100,000 of 10%, 20-year bonds. If Bluefield's tax rate is 40%, the after-tax cost of borrowing related to these bonds for 2013 is:
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Quizplus · Accepted Answer

$100,000 x 10% = $10,000 interest expense; $10,000 x (1-40%) = $6,000 after-tax cost of borrowing