Question

?if a corporation issued $8,000,000 in bonds which pay 5% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%?

Answer 1

$8,000,000 - corporate issued
5 % -  annual interest
30 % - income tax rate
Annual net cash cost - ?

Formula and Solution - (8,000,000 x 0.05) x 0.7 = 280,000
Answer: The Annual net cash cost - $280,00