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
- When was Barclays founded, and what were its origins?
- What is the Barclays eagle, and why is it a useful detail to know?
- Walk me through the 2008 Lehman Brothers acquisition — what exactly did Barclays buy, and why does it define the firm's US investment bank?
- Why did Barclays NOT buy Lehman Brothers whole before it filed for bankruptcy — and why did it buy the US business days later?
- How did Barclays get through the 2008 crisis without a UK government bailout, and how should you talk about it?
- What were BZW and Barclays Capital, and why does that history explain the firm's debt DNA?
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