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LL Incorporated's currently outstanding 8% coupon bonds have a yield to maturity of 12%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 30%, what is LL's after-tax cost of debt? Round your answer to two decimal places.

Respuesta :

saqib097

Answer:

8.4%

Explanation:

After-tax cost of debt = YTM x (1 - tax rate)

YTM = 12%

Tax Rate = 30%

= 0.12(1 - 0.3)

= 0.12(0.70)

After-tax cost of debt = 0.084 or 8.4%

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