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

question 70

Multiple Choice

Compute the after-tax interest expense for a firm with Interest on Excess Cash = $2,000, Interest on Debt = $7,000, and a tax rate of 30%.

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

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Definitions:

Outstanding Common Stock

The shares of a corporation's common stock that are issued, sold, and actively held by investors, excluding any treasury stock.

Annual Amortization

The process of spreading the cost of an intangible asset over its useful life on a yearly basis.

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to its shareholders, often reinvested in the business.

Partial Equity Method

An accounting practice used for recording investments, where only part of the investment income is recorded in proportion to ownership, distinct from the full equity method.