The Holmes Company's currently outstanding bonds have an 8% coupon and an 11% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is Holmes' after-tax cost of debt

If its marginal tax rate is 25%, Holmes' after-tax cost of debt is 8.25%

Explanation:

In order to calculate Holmes' after-tax cost of debt If its marginal tax rate is 25% we would have to calculate the following formula:

After-tax cost of debt =yield to maturity*(1-marginal tax rate)

According to the given data we have the following:

yield to maturity=11%

marginal tax rate=25%

Therefore, After-tax cost of debt =11%*(1-0.25)

After-tax cost of debt =8.25%

If its marginal tax rate is 25%, Holmes' after-tax cost of debt is 8.25%

answer: kevoto

explanation: be healthy

hi : ) i found this so i hope this !

"we first find value of tax in dollars.

the difference between the two prices   is: 23. 54 - 22 = 1.54

therefore the sales tax in dollars is 1.54

the tax % will be   (amount of tax / original cost price ) × 100

(1.54 / 22) × 100  → (0.07) × 100 =   7

so the tax rate is 7%

we can double check the answer.

7 % of 22   → (7/100) × 22 → 0.07 × 22 = 1.54

22 + 1.54 = 23.54"