The 'Cost of Debt' Is the Before-Tax Cost of Debt

question 47

True/False

The 'cost of debt' is the before-tax cost of debt while the effective cost of debt is the after-tax cost of debt, which is lower for a profitable tax-paying firm.

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Definitions:

Colluded

Pertains to an agreement, often secretive, between parties to limit competition or deceive others, frequently seen as unethical or illegal in business practices.

Justifiable

Capable of being shown as reasonable or warranted under the circumstances.

Unreliable

Describes something or someone that cannot be depended upon; opposite of reliable.

Semivariable Costs

Costs that contain both fixed and variable components and change in proportion to activity levels, but not as directly as variable costs.