a firm's aftertax cost of debt will increase if there is a(n): multiple choice decrease in the company's debt-equity ratio. decrease in the company's tax rate. increase in the credit rating of the company's bonds. increase in the company's beta. decrease in the market rate of interest.

Because it represents the actual cost of debt to the business, the after-tax cost of debt is more relevant. Because interest is a expense that can be deducted from taxable income, the total amount that we pay in interest is reduced to the extent that we save taxes by deducting it.

What is the cost of debt formula?

You will need to know your effective tax rate in order to calculate the cost of debt by dividing total debt by total interest.Then, add up all of those outcomes. Divide the amount you owe by your interest rate to get the weighted average interest rate. Your weighted average interest rate is 6.5 percent.

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