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

question 74

Multiple Choice

Compute the after-tax interest expense for a firm with Interest on Excess Cash = $1,000, Interest on Debt = $5,000, and a tax rate of 30%.

• A) $2,500
• B) $2,800
• C) $3,100
• D) $3,300

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Definitions:

Netflix

A streaming service that offers a wide variety of TV shows, movies, anime, documentaries, and more on thousands of internet-connected devices.

Long-Run Supply Curve

A graph that shows the relationship between the price of a good and the quantity supplied by all firms in the market, assuming all inputs are variable and firms can enter or exit the market.

Elasticity

Elasticity measures how responsive the quantity demanded or supplied of a good or service is to a change in one of its determinants, such as price, income, or prices of related goods.

Constant-Cost Industry

An industry where the input prices remain stable as the industry's output changes, leading to a linear supply curve because costs do not vary with the level of production.