Which of the following is the proper way to adjust the cost of debt to estimate the after-tax cost of debt? A)R_d ÷ (1 + T_c) B)R_d ÷ (1 - T_c) C)R_d × (1 - T_c) D)R_d × (1 + T_c)

Question

Quizplus · Accepted Answer

The correct way to adjust the cost of debt to estimate the after-tax cost of debt is by multiplying the cost of debt (before taxes) by (1 minus the tax rate), which is represented in option C. This formula accounts for the tax shield provided by interest expenses.

Which of the Following Is the Proper Way to Adjust