Hi everyone,
Could anyone tell me why the cost of debt after tax is Rd*(1-t)?? If we assume that the cost of debt is Rd, does the company pay taxes on the interest paid?
Thank you
Hi everyone,
Could anyone tell me why the cost of debt after tax is Rd*(1-t)?? If we assume that the cost of debt is Rd, does the company pay taxes on the interest paid?
Thank you
Paying interest reduces a company’s taxable income, thereby reducing its income tax expense.