After-Tax Cost of Debt LL Incorporated's currently outstanding 11% coupon bonds have a yield to maturity of 8.3%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is LL's after-tax cost of debt?

After-Tax Cost of Debt LL Incorporated's currently outstanding 11% coupon bonds have a yield to maturity of 8.3%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is LL's after-tax cost of debt?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

After-Tax Cost of Debt

LL Incorporated's currently outstanding 11% coupon bonds have a yield to maturity of 8.3%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is LL's after-tax cost of debt? Round your answer to two decimal places.

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