Hi all, The 6 percent semiannual coupon, 7-year notes of Woodbine Transportation, Inc. trade for a price of $94.54. What is the companys after-tax cost of debt capital if its marginal tax rate is 30 percent? A) 2.1%. B) 4.9%. C) 4.2%. D) 6.0%. Ok, once you get the i/y do you change into bond equivalent yield or into effective annual yield to calculate annual rate and then tax-effect it? S
BEY, just double the sa yield. Thus the answer is B, 4.9%
Its B … Get I/Y multiply by 2 … and then (I/Y *2) * ( 1- tax rate)