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

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

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

Quizplus · Accepted Answer

Interest expense is deductible before taxes, which means it reduces taxable income and results in a lower tax liability. Therefore, the after-tax cost of interest expense is equal to the interest paid times (1 - tax rate).

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