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Terrier Company is in a 45 percent tax bracket and has a bond outstanding that yields 11percent to maturity. a.

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Terrier Company is in a 45 percent tax bracket and has a bond outstanding that yields 11percent to maturity.
a. What is Terrier’s after tax cost of debt?
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 30percent. What is Terrier’s new after tax cost of debt?
c. Has the after tax cost of debt gone up or down from part a to part b? Explain why.

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a b c It has gone up The before tax yi…View the full answer


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Foundations Of Financial Management

Foundations Of Financial Management

ISBN: 9781264097623

18th Edition

Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen

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Question Details
Chapter # 11- Cost of Capital
Section: Problem
Problem: 11
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Question Posted: September 28, 2023 03:58:12
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