Answered: If the cost of debt is 6% and the…

If the cost of debt is 6% and the corporate tax rate is 20% what is the after tax cost of debt? 12% 4.8% 1.2% 6% Tax Rate is not relevant

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 87E: Cost of Debt Financing Stinson Corporations cost of debt financing is 6%. Its tax rate is 30%....

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Concept explainers

Cash and Liquid Asset Management

Cash management is the process of controlling cash inflow & cash outflow, managing the cashflows inside the business, and utilizing the cash for business operation at any point in time. A business has to maintain a certain level of cash to meet various financial obligations. Cash management is essential because businesses must utilize the cash to generate maximum profit. Cash management also ensures to maintain maximum liquidity in the business.

Question

If the cost of debt is 6% and the corporate tax rate is 20% what is the after tax cost of debt?

	12%
	4.8%
	1.2%
	6% Tax Rate is not relevant

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Cost of Debt Financing Stinson Corporations cost of debt financing is 6%. Its tax rate is 30%. Required: Calculate the after-tax interest rate. (Vote: Round answer to one decimal place.)
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