Calculate the after-tax cost of the debt under each of the following conditions:
a. rd of 5%, tax rate of 12%
b. rd of 5%, tax rate of 32%
c. rd of 5%, tax rate of 42%
after-tax cost of the debt = pre-tax cost of debt * (1 - tax rate)
a]
after-tax cost of the debt = 5% * (1 - 12%) = 4.4%
b]
after-tax cost of the debt = 5% * (1 - 32%) = 3.4%
c]
after-tax cost of the debt = 5% * (1 - 42%) = 2.9%
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