Terrier company is in a 35 percent tax bracket and has a, Ask an Expert

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Terrier Company is in a 35 percent tax bracket and has a bond outstanding that yields 9 percent to maturity.

a. What is Terrier's after tax cost of debt? (Do not round intermediate calculations. Input your answer as a percent rounded in 2 decimals)

After tax cost of debt _____________%

b. Assume that the yield on the bond goes down by 1 percentage point, and due tom tax reform. the corporate tax rate falls to 20 percent. What is Terrier's new after tax cost of debt? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimals.)

c. Has the after tax cost of debt gone up or down from part a to mpart b?

( ) It has gone up

( ) It has gone down

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Financial Management, Finance

Category:- Financial Management
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