JB Inc. has $5million of outstanding debt with a coupon rate of 12%. Current yield to maturity is 14%. If the firm's tax rate is 40%, what is the cost of debt for JB?
bunnyKutty
Sep 28, 2009, 06:14 AM
Yield to maturity = 14%
After-tax cost of debt = 14% (1 - 40%)
= 8.4%