Calculate their after-tax cost of debt, Finance Basics

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Calculate their after-tax cost of debt

Problem

DOG, Inc. has a $20 million, 8.25%, 10-year-year bond issue selling at 97. The bond pays annual interest. What would be the before-tax component cost of debt for DOG? (Show step by step on Texas BA Plus business calculator for the first step or excel)

Assuming they are in the 21% tax bracket and have unconstrained ability to take advantage of the tax benefits of debt, calculate their after-tax cost of debt.

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Finance Basics: Calculate their after-tax cost of debt

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