When calculating the viability of capital investment

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Reference no: EM131957413

Calculate the after-tax cost of debt under each of the following conditions:

a. Interest rate, 9 percent; tax rate, 0 percent.

b. Interest rate, 9 percent; tax rate, 10 percent.

c. Interest rate, 9percent; tax rate, 20 percent.

Explain why one would use the after-tax cost of debt (as opposed to the actual cost of debt financing) when calculating the viability of a capital investment?

Reference no: EM131957413

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