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PLEASE NO HANDWRITTEN OR COPIED ANSWERS Define the interest rate after-tax and the calculation for it.

PLEASE NO HANDWRITTEN OR COPIED ANSWERS

Define the interest rate after-tax and the calculation for it.

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Answer #1

The interest rate after tax is the known as initial cost of debt, that is adjusted for the effects of the incremental income tax rate.

The formula for the same is:

Before-tax cost of debt x (100% - incremental tax rate) = interest rate cost of debt.

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