Interest Expense Is Deductible Before Taxes and Therefore Has an After-Tax

question 104

True/False

Interest expense is deductible before taxes and therefore has an after-tax cost equal to the interest paid times (1 - tax rate).

---

Definitions:

Net Present Value

A financial metric used to evaluate the profitability of an investment, calculated by subtracting the present value of cash outflows from the present value of cash inflows over a period of time.

Salvage Value

The determined residual amount of an asset at the cessation of its utility.

Net Cash Inflows

The total amount of cash received minus cash paid out over a specific period, not including non-cash expenses.

Straight-Line Method

A method of depreciation that allocates an equal portion of an asset’s cost to each year of its useful life.