On January 1, Year 1, Brown Co. issued bonds with a face value of $200,000, a stated rate of interest of 10%, and a 20-year term to maturity. The bonds were issued at face value. If Bluefield's tax rate is 40%, what is the after-tax cost of borrowing related to these bonds for Year 1?

The after-tax cost of borrowing related to these bonds for Year 1 is $12,000.

Given Information

Face Value of Bond = $200,000

Rate of Interest 10 % p.a.

Tax Rate 40%

Cost of Borrowing of Bond for Year 1 (Before Tax)

= $200,000 * 10%

= $200,000 * 0.10

= $20,000

Cost of Borrowing of Bond for Year 1 (After Tax)

= $20,000 * (1 - 40%)

= $20,000 * 0.60

= $12,000

Therefore, the after-tax cost of borrowing related to these bonds for Year 1 is $12,000.

See similar solution here

link

the after tax borrowing cost is $12,000

Explanation:

The computation of the after tax borrowing cost is shown below;

= Annual interest - tax savings

= ($200,000 ×0.10)  - ($200,000 × 0.40)

= $20,000 - $8,000

= $12,000

hence, the after tax borrowing cost is $12,000

We simply applied the above formula so that the correct value could come

And, the same is to be considered

answer; ///(d); determining who competes most closely   with whom evaluating whether industry driving forces and competitive pressure favor some strategic groups and hurt others, and ascertaining whether the profit potential of different strategic groups varies due to the strengths and weaknesses in each groups respective market positions;

answerimplicit;