Answer:
after tax cost of debt because interest is partially, if not fully, tax deductible.
Explanation:
The debt requires fixed payment in the form of interest as attached to it. Also, since it is mandatory, it is an expense and not an appropriation of profits or earnings.
Further as the tax is payed on income after providing for all expenses, that is after providing for the interest expense also, the tax expense is reduced because of reduction in profit from interest expense.
Thus, on the net effect the company's cost of debt is the payment of interest less the tax benefit.
