If a corporation issued ¥5,000,000,000 in bonds which pay 10% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%?

Name: If a corporation issued ¥5,000,000,000 in bonds which pay 10% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%?
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Question

Quizplus · Accepted Answer

The annual gross interest payment would be 10% of ¥5,000,000,000, which is ¥500,000,000. 
The net cash cost would be ¥500,000,000 - (30% x ¥500,000,000) = ¥350,000,000.

If a Corporation Issued ¥5,000,000,000 in Bonds Which Pay 10