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After-tax cost of debt

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Calculate the after-tax cost of a $25 million debit issue that Pullman Manufacturing Corporation (40 percent marginal tax rate) is planning to place privately with a large insurance company. This long-term issue will yield 6.6 percent to the insurance company.

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This explains the computation of after-tax cost of debt with the help of illustration

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The after-tax cost debt= Yield*(1-tax rate)
=6.6%*(1-.4)
=3.96%
=Answer

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