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Homework answers / question archive / Proton Corp
Proton Corp. has bonds outstanding that have a coupon rate of 8% and a yield to maturity (YTM) of 6.5% Proton has a marginal tax rate of 40 percent. What is the after-tax cost of debt for Proton? Select one: a. 3.9% b.6.5% C. 8.0% d.4.8%
Answer: a.3.9%
Working:
| After tax cost of debt: |
| Yield to maturity*(1-Tax rate) |
| 6.5*(1-0.40) |
| 3.90% |
