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After tax Cost of debt

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J & B, Inc. has $5 million of debt outstanding with a coupon rate of 12 percent. Currently the yield to maturity on these bonds is 14 percent. If the firm's tax rate is 40 percent, what is cost of debt to J & b?

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Solution Summary

After tax Cost of debt is calculated for a company using data on coupon rate, yield to maturity and tax rate.

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Cost of debt = After tax cost of debt = ...

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