{"id":51474,"date":"2024-04-15T23:25:21","date_gmt":"2024-04-15T23:25:21","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=51474"},"modified":"2024-04-15T23:25:21","modified_gmt":"2024-04-15T23:25:21","slug":"a-formula-of-after-tax-component-cost-of-debt-is","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/a-formula-of-after-tax-component-cost-of-debt-is\/","title":{"rendered":"A formula of after-tax component cost of debt is"},"content":{"rendered":"

[amp_mcq option1=”interest rate-tax savings” option2=”marginal tax-required return” option3=”interest rate + tax savings” option4=”borrowing cost + embedded cost” correct=”option3″]<\/p>\n

The correct answer is: C. interest rate + tax savings.<\/p>\n

The after-tax component cost of debt is the cost of debt after taking into account the tax savings associated with interest payments. The formula for the after-tax component cost of debt is:<\/p>\n

After-tax component cost of debt = (1 – tax rate) * interest rate<\/p>\n

For example, if the interest rate on a loan is 10% and the tax rate is 20%, the after-tax component cost of debt is:<\/p>\n

After-tax component cost of debt = (1 – 0.2) * 0.1 = 0.08 = 8%<\/p>\n

The other options are incorrect. Option A, interest rate – tax savings, is the before-tax component cost of debt. Option B, marginal tax – required return, is the cost of equity. Option D, borrowing cost + embedded cost, is the total cost of debt.<\/p>\n","protected":false},"excerpt":{"rendered":"

[amp_mcq option1=”interest rate-tax savings” option2=”marginal tax-required return” option3=”interest rate + tax savings” option4=”borrowing cost + embedded cost” correct=”option3″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-51474","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\nA formula of after-tax component cost of debt is<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/a-formula-of-after-tax-component-cost-of-debt-is\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A formula of after-tax component cost of debt is\" \/>\n<meta property=\"og:description\" content=\"[amp_mcq option1=”interest rate-tax savings” option2=”marginal tax-required return” option3=”interest rate + tax savings” option4=”borrowing cost + embedded cost” correct=”option3″]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/a-formula-of-after-tax-component-cost-of-debt-is\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2024-04-15T23:25:21+00:00\" \/>\n<meta name=\"author\" content=\"rawan239\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rawan239\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"A formula of after-tax component cost of debt is","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/exam.pscnotes.com\/mcq\/a-formula-of-after-tax-component-cost-of-debt-is\/","og_locale":"en_US","og_type":"article","og_title":"A formula of after-tax component cost of debt is","og_description":"[amp_mcq option1=”interest rate-tax savings” option2=”marginal tax-required return” option3=”interest rate + tax savings” option4=”borrowing cost + embedded cost” correct=”option3″]","og_url":"https:\/\/exam.pscnotes.com\/mcq\/a-formula-of-after-tax-component-cost-of-debt-is\/","og_site_name":"MCQ and Quiz for Exams","article_published_time":"2024-04-15T23:25:21+00:00","author":"rawan239","twitter_card":"summary_large_image","twitter_misc":{"Written by":"rawan239","Est. reading time":"1 minute"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/exam.pscnotes.com\/mcq\/a-formula-of-after-tax-component-cost-of-debt-is\/","url":"https:\/\/exam.pscnotes.com\/mcq\/a-formula-of-after-tax-component-cost-of-debt-is\/","name":"A formula of after-tax component cost of debt is","isPartOf":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#website"},"datePublished":"2024-04-15T23:25:21+00:00","dateModified":"2024-04-15T23:25:21+00:00","author":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/5807dafeb27d2ec82344d6cbd6c3d209"},"breadcrumb":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/a-formula-of-after-tax-component-cost-of-debt-is\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/exam.pscnotes.com\/mcq\/a-formula-of-after-tax-component-cost-of-debt-is\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/exam.pscnotes.com\/mcq\/a-formula-of-after-tax-component-cost-of-debt-is\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/exam.pscnotes.com\/mcq\/"},{"@type":"ListItem","position":2,"name":"Financial management","item":"https:\/\/exam.pscnotes.com\/mcq\/category\/financial-management\/"},{"@type":"ListItem","position":3,"name":"A formula of after-tax component cost of debt is"}]},{"@type":"WebSite","@id":"https:\/\/exam.pscnotes.com\/mcq\/#website","url":"https:\/\/exam.pscnotes.com\/mcq\/","name":"MCQ and Quiz for Exams","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/exam.pscnotes.com\/mcq\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/5807dafeb27d2ec82344d6cbd6c3d209","name":"rawan239","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/761a7274f9cce048fa5b921221e7934820d74514df93ef195a9d22af0c1c9001?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/761a7274f9cce048fa5b921221e7934820d74514df93ef195a9d22af0c1c9001?s=96&d=mm&r=g","caption":"rawan239"},"sameAs":["https:\/\/exam.pscnotes.com"],"url":"https:\/\/exam.pscnotes.com\/mcq\/author\/rawan239\/"}]}},"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/posts\/51474","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/comments?post=51474"}],"version-history":[{"count":0,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/posts\/51474\/revisions"}],"wp:attachment":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/media?parent=51474"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/categories?post=51474"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/tags?post=51474"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}