Q442
A formula of after-tax component cost of debt is
A.
interest rate-tax savings
AnswerB.
marginal tax-required return
C.
interest rate + tax savings
D.
borrowing cost + embedded cost
Answer: Option A
Solution
Answer: Option A
Solution:
A formula of after-tax component cost of debt is interest rate-tax savings. Cost of debt refers to the effective rate a company pays on its current debt. In most cases, this phrase refers to after-tax cost of debt, but it also means the company's cost of debt before taking taxes into account.