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Terrier Company is in a 40 percent tax bracket and has a bond outstanding that yields 10 percent to maturity. a. What is Terriers aftertax

Terrier Company is in a 40 percent tax bracket and has a bond outstanding that yields 10 percent to maturity.

a. What is Terriers aftertax cost of debt? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

b. Assume that the yield on the bond goes down by 1 percentage point, and due to tax reform, the corporate tax rate falls to 25 percent. What is Terriers new aftertax cost of debt? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

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

It has gone up
It has gone down

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