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After tax cost of debt for Heuser Company

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The Heuser Company's currently outstanding bonds have a 10 percent coupon and a 12 percent yield to maturity. Heuser believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35 percent, what is Heuser's after-tax cost of debt (please show all calculations)?

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Solution Summary

This explains the computation of after tax cost of debt for Heuser Company

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

Note:
*** Remember, this ...

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