Criss-Cross industries has earnings before interest and taxes (EBIT) of $10 million. Interest payments are $2 million
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Question:
Criss-Cross industries has earnings before interest and taxes (EBIT) of $10 million. Interest payments are $2 million and the corporate tax rate is 35%. Construct a simple income statement to show that debt interest reduces the taxes the firm owes to the government. How much more tax would Criss-Cross pay if it were financed solely by equity?
Related Book For
Financial Management Principles and Applications
ISBN: 978-0133423822
12th edition
Authors: Sheridan Titman, Arthur Keown, John Martin
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