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Calculation of the After-tax Cost of Debt

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Micro Spinoffs, Inc., issued 20-year debt one year ago at par value carrying a coupon
rate of 8 percent (payable annually). Today, the debt is selling at $1,050. If the firm's
tax bracket is 35 percent, what is the after-tax cost of debt for Micro Spinoffs?

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Solution Summary

the solution is in an excel file that uses excel built-in formula for the calculation of the cost of debt, as well as the After-tax cost of debt

Solution provided by:
Manal Elkhoshkhany, MBA
Education
  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
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