The dollar cost of debt for Coval Consulting, a U.S. research firm, is 7.3%.
The firm faces a tax rate of 37% on all income, no matter where it is earned. Managers in the firm need to know its yen cost of debt because they are considering a new bond issue in Tokyo to raise money for a new investment there. The risk-free interest rates on dollars and yen are r Subscript $ Baseline equals r$=5% and r Subscript yen Baseline equals r¥=1.4% respectively. Coval Consulting is willing to assume that capital markets are internationally integrated and that its free cash flows are uncorrelated with the yen-dollar spot rate. What is Coval Consulting's after-tax cost of debt in yen (Hint: Start by finding the after-tax cost of debt in dollars and then finding the yen equivalent.)
The after-tax cost of debt in dollars is _____________%. (Round to two decimal places.)