ABC has 20 million shares outstanding, trading at $20 per share. ABC currently has no debt, but plans to borrow $100 million on a permanent basis. It would use the borrowed funds to repurchase shares. Upon the announcement of this plan, ABC's share price rose to $20.50. Assume that the discount rate on interest tax shields is 8% and the marginal corporate tax rate = 20%. 

What is ABC's cost of debt?

Answer rating: 100% (QA)

To calculate ABCs cost of debt we need to consider the interest tax shields provided by the debt The ... View the full answer