Blair Housewares wants to add new products to its existing line of products. Managers are correct in believing that the purpose
1 answer:
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Answer:
D. 3.66%
Explanation:
For computing the after tax cost of debt we need to apply the RATE formula i.e to be shown in the attachment
Given that,
Present value = $2,120
Future value or Face value = $2,000
PMT = $2,000 × 6.6% ÷ 2 = $66.60
NPER = 18 years × 2 = 36 years
The formula is shown below:
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
So, after solving this,
1. The pretax cost of debt is 3.05% × 2 % = 6.10%
2. And, the after tax cost of debt would be
= Pretax cost of debt × ( 1 - tax rate)
= 6.10% × ( 1 - 0.40)
= 3.66%
