In the Formula for Return on Investment, Interest Expense Is

question 6

Multiple Choice

In the formula for return on investment, interest expense is multiplied by (1 - tax rate) .Why is this adjustment made?

• A) Interest is not tax deductible.
• B) Debt is excluded from the denominator.
• C) Net income in the formula is after tax.
• D) Dividends are not deductible for tax purposes.
• E) None of the answers are correct.

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Definitions:

Unintended

Refers to effects or outcomes that were not anticipated or planned for.

Deregulation

The reduction or elimination of government power in a particular industry, usually with the goal of increasing competition and efficiency.

Regulated Industries

Sectors of the economy that are subject to governmental controls and regulations, often to protect public interest.

Decreased Prices

A situation where the cost of goods or services is reduced from a previous level.