Yield to Maturity = 14%
Before-tax cost of Debt = 14%
After-tax cost of debt = (1 - 0.25)(0.14)
After-tax cost of debt = 10.50%
SOLUTION :
After tax cost of debt, rD :
= Pre tax cost of debt * ( 1 - Tax rate in decimals)
= Yield to maturity in percentage * ( 1 - Tax rate in decimals)
= 14 * ( 1 - 0.25)
= 10.50 % (ANSWER)
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