Ask Question
19 August, 15:39

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.

+3
Answers (1)
  1. 19 August, 16:06
    0
    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%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “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 ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers