The cost (interest rate) of the loan Jackie needs for her business is 8 percent per year.

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The cost (interest rate) of the loan Jackie needs for her business is 8 percent per year. Given that the company’s net income will fall by less than the amount of interest paid, is Jackie correct to think that the after-tax cost of the loan is lower than 8 percent? With a tax rate of 25 percent, what is the after-tax cost of this loan?

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Introduction To Corporate Finance

ISBN: 9781118300763

3rd Edition

Authors: Laurence Booth, Sean Cleary

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