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Cost of Debt

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Please include with your response any necessary formula to solve this problem (on a regular calculator, NOT a financial calculator), along with a detailed explanation of how to solve the problem.

Royal Jewelers, Inc. has an after-tax cost of debt of 6 percent. With a tax rate of 40 percent, what can you assume the yield on the debt is?

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The solution answers the question(s) below. The cost of debt formulas are examined.

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