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💰 Valuation
Hard
A company has Debt/EBITDA = 5x and Interest Coverage Ratio = 5x. Tax rate = 50%. What's the after-tax interest rate on the debt?
Answer
Debt = 5 × EBITDA → EBITDA = Debt / 5. Interest Coverage = EBITDA / Interest = 5 → Interest = EBITDA / 5 = (Debt / 5) / 5 = Debt / 25.
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