Question

A firm incurs $70,000 in interest expenses each year. If the tax rate of the firm is 30%, what is the effective after-tax interest rate expense for the firm?

Answer 1

After tax interest expenses = Interest expenses x (100 - Tax Rate)

= 70000 x (100 - 30)%

= 70000 x 70%

= $49,000.00

Explanation: