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To find the after-tax cost of debt, multiply the before-tax cost of debt by Galbraith Co. can borrow at an interest rate of 11.1% for
To find the after-tax cost of debt, multiply the before-tax cost of debt by Galbraith Co. can borrow at an interest rate of 11.1% for a period of four years. Its marginal federal-plus-state tax rate is 30%. What is Galbraith's after-tax cost of debt? Galbraith Co. has outstanding 5-year noncallable bonds with a face value of $1, 000. These bonds have a current market price of $1, 438.04, a coupon rate of 14%, and annual coupon payments. The company faces a tax rate of 30%. If the company wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt? 3.32% 2.89% 2.60% 2.31%
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