Question: One of the advantages of borrowing is that interest is

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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  • CreatedApril 17, 2014
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