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After tax cost of debt

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The Heuser Company's currently outstanding bonds have a 10% coupon and a 12% yield to maturity. Heuser believes it could issue new bonds at par that would provide a similar yield to maturity. It its marginal tax rate is 35%, what is Heuser's after tax cost of debt?

After tax cost of debt = interest rate - tax savings

After tax cost of debt = rd - rdT

After tax cost of debt = rd(1-T)

I used 10%(1-.35) = after tax cost of debt = 7%

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The Heuser Company's currently outstanding bonds have a 10% coupon and a 12% yield to maturity. Heuser believes it could ...

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