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The after-tax cost of debt is lower than the before-tax cost of debt. The reason is that: 1) Companies can deduct interest payments from taxable

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The after-tax cost of debt is lower than the before-tax cost of debt. The reason is that: 1) Companies can deduct interest payments from taxable incomes. 2) Bondholders can deduct interest payments from taxable incomes. 3) Bondholders can claim tax credit of interest payments. 4) None of the above

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