What is after-tax cost of debt

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Reference no: EM132049289

Nike is in a 39 percent tax bracket and has a bond outstanding that yields 8 percent to maturity.

a. What is Nike’s after-tax cost of debt?

b. Assume that the yield on the bond goes down by 1 percentage point, and due to tax reform, the corporate tax rate falls to 20 percent. What is Nike’s new after-tax cost of debt?

c. Has the after-tax cost of debt gone up or down from part a to part b? Explain why.

Reference no: EM132049289

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