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question archive The coupon rate on a debt issue is 7%

The coupon rate on a debt issue is 7%

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The coupon rate on a debt issue is 7%. If the yield to maturity on the debt is 11%, what is the after-tax cost of debt in the weighted average cost of capital if the firm's tax rate is 41%? (Round your answer to 2 decimal places.)

5.14%

7.84%

6.49%

8.64%

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Answer:

6.49%
YTM is 11%
Tax Rate 41%
After Tax Cost of debt = 11%(1-.41)
After Tax Cost of debt = 6.49%

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