Barclays Deck
How do you calculate the after-tax cost of debt, and why do you multiply by (1 minus the tax rate)?
Model answer
After-tax cost of debt = pre-tax cost of debt x (1 - tax rate). Because interest is tax-deductible, every dollar of interest reduces taxable income and therefore saves the company (tax rate x $1) in…
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More from Barclays Deck
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