Genetech has $4,000,000 in assets. It has decided to finance 30% with long-term financing (9% rate) and 70% with short-term financing (7%) rate. Assuming a 21% tax rate, what will its annual after-tax interest costs be?
A) $81,000
B) $147,000
C) $182,400
D) $240,160

Question

Quizplus · Accepted Answer

Annual after-tax interest costs = ($4,000,000)(0.3)(0.09) × (100% − 21%) + ($4,000,000)(0.7)(0.07) × (100% − 21%) = $240,160

Genetech Has $4,000,000 in Assets