The heuser company currently outstanding  10% coupon bond have atm 12% . Heuser believes it could issue at par new bonds that would provide a similar ytm. If it's marginal tax rate is 35%. What is heuser's after tax cost of debt?

To calculate Heuser's **after-tax cost of debt**, we can use the following formula:

\[
\text{After-tax cost of debt} = \text{YTM} \times (1 - \text{Tax Rate})
\]

Here are the details we have:
- Yield to Maturity (YTM) = 12% (the company believes it can issue new bonds at this rate)
- Tax Rate = 35%

Substitute the values into the formula:

\[
\text{After-tax cost of debt} = 12\% \times (1 - 0.35) = 12\% \times 0.65 = 7.8\%
\]

Thus, Heuser's **after-tax cost of debt** is **7.8%**.

Would you like more details or have any other questions?

Here are 5 questions related to this problem:
1. How does the coupon rate of a bond affect its market price?
2. What is the difference between a bond's coupon rate and its YTM?
3. How does the tax rate impact the after-tax cost of debt?
4. What is the significance of issuing bonds at par value?
5. How do bond ratings influence the cost of debt?

**Tip**: Lowering your company's debt cost can improve profitability and reduce financial risk in the long term.

The Heuser company currently has an outstanding 10% coupon bond with an ATM of 12%. Heuser believes it could issue at par new bonds that would provide a similar YTM. If its marginal tax rate is 35%, what is Heuser's after-tax cost of debt?

Calculate the after-tax cost of debt for Heuser Company, using the yield to maturity of 12% and a marginal tax rate of 35%. This detailed guide covers the key formula for after-tax debt cost and explains how the tax rate impacts corporate borrowing costs. Ideal for finance students and professionals.

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