To find the net savings on the interest calculated after tax and the after-tax cost of debt capital as a percentage, we need to follow these steps:
1. Calculate the interest on the debt capital:
The interest on the debt capital can be calculated using the given interest rate.
[tex]\[
\text{Interest on debt capital} = \[tex]$80,000 \times 5\% = \$[/tex]80,000 \times 0.05 = \$4,000
\][/tex]
2. Calculate the interest after tax:
Apply the tax rate to the interest to calculate the net savings.
[tex]\[
\text{Interest after tax} = \[tex]$4,000 \times (1 - 0.40) = \$[/tex]4,000 \times 0.60 = \$2,400
\][/tex]
Thus, the net savings on the interest after tax is \$2,400.
3. Calculate the after-tax cost of debt capital as a percentage:
This is found by taking the interest after tax and expressing it as a percentage of the debt capital.
[tex]\[
\text{After-tax cost of debt capital percentage} = \left( \frac{\[tex]$2,400}{\$[/tex]80,000} \right) \times 100 = 3\%
\][/tex]
So, to answer the question:
The net savings on the interest calculated after tax is \$2,400.
The after-tax cost of debt capital is [tex]\( 3 \)[/tex] percent.
