Proton Corp

Accounting Nov 30, 2020

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%

Expert Solution

Answer: a.3.9%

Working:

After tax cost of debt:

Yield to maturity*(1-Tax rate)

6.5*(1-0.40)

3.90%

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