After-tax Cost: The final cost of an investment to an investor in a particular tax bracket, after calculating the effect of income tax.
An exception might occur when an issuer's tax rate is high, and the issuer could replace it with debt securities at a lower after-tax cost.
This can be measured in either before- or after-tax returns; however, because interest expense is deductible, the after-tax cost is seen most often. This is one part of the company's capital structure, which also includes the cost of equity.
Typically, an issue is not called away unless the conversion price is 15-25% below the current level of common. An exception might be where an issuers tax rate is high, and the issuer could replace it with debt securities at a lower after-tax cost.
 See also: Banks, Debt security, Controlling interest, Expense, Credit quality
  
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