Question

In: Accounting

If a corporation issued $10260000 in bonds which pay 5% annual interest, what is the annual...

If a corporation issued $10260000 in bonds which pay 5% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%?

$5130000

$513000

$153900

$359100

Solutions

Expert Solution

Ans is

$359100
Annual interest                                                                                                                 5,13,000 10260000*.05
Less:-Interest saving on interest                                                                                                                 1,53,900 513000*,3
Net cash cost                                                                                       3,59,100
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