One of the advantages of borrowing is that interest is deductible for income tax purposes. a. If
Question:
One of the advantages of borrowing is that interest is deductible for income tax purposes.
a. If a company pays 8 percent interest to borrow $500,000, but is in an income tax bracket that requires it to pay 40 percent income tax, what is the actual net-of-tax interest cost that the company incurs?
b. What is the effective interest rate that is paid by the company?
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a Interest cost before income tax 500000 x 8 40000 Tax savings via deduc...View the full answer
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Related Book For
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
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