FVBJ Corporation borrowed a loan from a band with an interest of 12.5% and its tax rate is 35%. Calculate the after-tax cost of debt of FBJV Corporation.

Before-tax Cost of Debt = Interest Rate
Before-tax Cost of Debt = 12.50%

After-tax Cost of Debt = Before-tax Cost of Debt * (1 - Tax Rate)
After-tax Cost of Debt = 12.50% * (1 - 0.35)
After-tax Cost of Debt = 12.50% * 0.65
After-tax Cost of Debt = 8.125% or 8.13%

Therefore, the after-tax cost of debt of FBJV Corporation is 8.13%