Answer:
6.50%
Explanation:
The after-tax cost of the debt is the yield to maturity after having deducted the tax shield which is computed using the formula below:
after-tax cost of debt=pretax cost of debt*(1-tax rate)
pretax cost of debt=yield to maturity=10%
tax rate=35%
The after-tax cost of debt=10%*(1-35%)
The after-tax cost of debt=10%*65%
The after-tax cost of debt=6.50%
