What is Javelin Consulting’s after-tax cost of debt in JPY?

The dollar cost of debt for Javelin Consulting, a Canadian research firm, is 7.5%. The firm faces a tax rate of 30% on all income, no matter where it is earned. Managers in the firm need to know its JPY cost of debt because they are considering launching a new bond issue in Tokyo to raise money for a new investment there. The risk-free interest rates on CAD and JPY are rCAD = 5% and rJPY = 1%, respectively. Javelin Consulting is willing to assume that capital markets are internationally integrated and that its free cash flows are uncorrelated with the JPY–CAD spot rate. What is Javelin Consulting’s after-tax cost of debt in JPY? (Hint: Start by finding the after-tax cost of debt in CAD and then find the JPY equivalent.)

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