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    After tax cost of debt for Heuser Company

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    9-5
    The Heuser Company's currently outstanding 10% coupon bonds have a yield to maturity of 12%. Heuser believes it could issue a par new bonds that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is the Heuser's after tax cost of debt?

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    Solution Preview

    Heuser's after tax cost of debt= Yield to maturity*(1-tax rate)
    =12%*(1-.35)
    =7.8%=Answer

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    Solution Summary

    This provides the steps to compute after tax cost of debt for Heuser Company

    $2.19

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