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Calculating the after-tax cost of debt for a business

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Calculate the after-tax cost of debt for the Wallace Clinic, a for-profit healthcare provider, assuming that the coupon rate set on its debt is 11 percent and its tax rate is either:

a. 0 percent
b. 20 percent
c. 40 percent

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Solution Summary

Solution describes the steps to calculate the after tax cost of debt in the given cases.

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a. 0 percent

Tax Rate=T=0%
Cost of debt=rd=11%

After tax cost of ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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