Compute the After-Tax Interest Expense for a Firm with Interest

question 79

Multiple Choice

Compute the after-tax interest expense for a firm with Interest on Excess Cash = $5000,Interest on Debt = $8000,and a tax rate of 30%.

• A)$2100
• B)$2200
• C)$2500
• D)$2700
• E)$3100

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Definitions:

Debt-Equity Ratio

A financial ratio used to understand a company's leverage, by dividing its complete liabilities by the equity available to shareholders.

Price-Earnings Ratio

A valuation ratio of a company's current share price compared to its per-share earnings, used to gauge the relative value of a stock.

Earnings Per Share

A profitability measure that indicates the portion of a company's profit allocated to each outstanding share of common stock, calculated as net income minus dividends on preferred stock divided by the average outstanding shares.

Earnings Before Taxes

A company's profit before taxation is deducted.