# Before and after tax cost of debt

Assume that Dell issued 30-year bonds, 8% coupon rate, semiannual, 7 years ago. The bond currently sells for 108% of face value. The company's tax rate is 35%.

1. What is the pretax cost of debt?

2. What is the after-tax cost of debt?

3. Which is more important and why?

https://brainmass.com/business/interest-rates/before-after-tax-cost-debt-361819

#### Solution Preview

1. The pretax cost is the YTM on the existing bonds. The YTM is the discounting rate that will make the present value of interest and ...

#### Solution Summary

The solution explains how to calculate the before and after tax cost of debt and which is more important

$2.19