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One of the advantages of borrowing is that interest is deductible for income tax purposes. a. If a company pays 5 percent interest to
One of the advantages of borrowing is that interest is deductible for income tax purposes. a. If a company pays 5 percent interest to borrow $500,000, but is in an income tax bracket that requires it to pay 30 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? (Round your answer to 1 decimal place.) a. Actual net-of-tax interest cost b. Effective interest rate
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