Wenonah Canoe Company received loans of $2,500,000. The interest rate on the loan is 6.2%. The...
Wenonah Canoe Company received loans of $2,500,000. The interest rate on the loan is 6.2%. The company's tax rate is 20% . What is the company's after-tax cost of debt?
Multiple Choice
6.0%
7.75%
4.96%
1.24%
Homework Answers
Interest on loan = 6.2%
t = tax rate = 20%
After tax cost of debt = Interest on loan *(1 - tax rate)
= 6.2% *(1 - 20%)
= 4.96%
Therefore, After tax cost of debt is 4.96%
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