Final answer:
Without the interest rate, the amount of interest Arnell pays on their debt cannot be calculated. However, if we assume a 6% interest rate as in the example provided, the annual interest payment before taxes would be $2,100,000.
Step-by-step explanation:
The question does not provide enough information to accurately calculate the amount of interest that Arnell will pay on the $35 million in debt, as the interest rate is not specified. To determine the interest payment, the interest rate on the issued debt would need to be known. Generally, the interest payment is calculated by multiplying the total amount of debt by the interest rate. Without the rate, it is impossible to provide a specific answer.
However, based on the reference provided in the question where a local water company issued a $10,000 bond at an interest rate of 6%, one could assume they are asking for an interest calculation similar to this. If Arnell's debt had the same interest rate of 6%, the annual interest payment before taxes would be 0.06 x $35,000,000 = $2,100,000. However, since Arnell's marginal tax rate is 28%, the after-tax interest payment would be ($2,100,000) x (1 - 0.28) = $1,512,000. But without the exact interest rate for Arnell's debt, the actual interest payment cannot be calculated.