Problem 1. Calculate the cost of debt before tax Jefferson co. has a $3 million loan with a 5% interest rate and a $500.000 loan with a 6% rate: The effective interest rate on its debt is 5.2%. The company's tax rate is 30%. Thus, its cost of debt is 3.64%, or 5.2% (1 - 30%) Problem 2. Calculate the cost of debt after tax John and July Corp. only debt is a bond it has issued with a 6% rate its pre-tax cost of debt is 6%. If its tax rate is 40%, the difference between 100% and 40% is 60% and 60% of the 5% is 3%. Please contact me if you have any question. Professor Myott Problem 1. Calculate the cost of debt before tax Jefferson co. has a $3 million loan with a 5% interest rate and a $500.000 loan with a 6% rate: The effective interest rate on its debt is 5.2%. The company's tax rate is 30%. Thus, its cost of debt is 3.64%, or 5.2% (1 - 30%) Problem 2. Calculate the cost of debt after tax John and July Corp. only debt is a bond it has issued with a 6% rate its pre-tax cost of debt is 6%. If its tax rate is 40%, the difference between 100% and 40% is 60% and 60% of the 5% is 3%. Please contact me if you have any question. Professor Myott