4 THE COST OF CAPITAL AND CAPITAL STRUCTURE the corporation holding the common stock will earn after tax. The firm has earned before tax income of $153.85. Assume that a company borrows at a cost of 0.08. Its tax rate is 0.35. What is the minimum after-tax cost of capital for a certain cash flow if a 100 percent debt is used? b 100 percent common stock? stockholders will accept 0.08) (assume that the tp 5 Assume that the return on tax-exempt securities is 0.09 and that = 0.3, t, = 0.15, and t = 0.35, where t, is the rate on capital gains, t, is the corporate tax rate, and to is the personal tax rate on dividends and interest. Equilibrium conditions exist.