Colossus Company has the ability to obtain debt financing at 10 percent. It currently has $2,000,000 in debt outstanding and is considering taking on more to fund a major expansion. It has a marginal income rate of 25 percent. US Treasury bonds are currently yielding 2.0 percent. What is the firm's after-tax cost of debt?

Answer rating: 100% (QA)

To calculate the aftertax cost of debt we need to consider the tax shield provided by the in... View the full answer