The reason for after tax borrowing rate is the suitable discount rate to be used for the lease evaluation. Introduction: After tax rate : It is the interest rate multiplied with the debt amount. For example, if a company’s debt has annual interest rate of 10% and the combined state and federal income tax rate is 30%, the after tax rate value is 7%. The computation is as follows: [ 10 % Interest rate × ( 100 % − 30 % ? tax ? rate ) ] = [ 10 % × 70 % ] = 7 %

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Chapter 27, Problem 9CRCT

Summary Introduction

To determine: The reason for after tax borrowing rate is the suitable discount rate to be used for the lease evaluation.

Introduction:

After tax rate: It is the interest rate multiplied with the debt amount. For example, if a company’s debt has annual interest rate of 10% and the combined state and federal income tax rate is 30%, the after tax rate value is 7%. The computation is as follows:

[10%Interest rate×(100%−30%?tax?rate)]=[10%×70%]=7%

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Question

Chapter 27, Problem 9CRCT

Summary Introduction

To determine: The reason for after tax borrowing rate is the suitable discount rate to be used for the lease evaluation.

Introduction:

After tax rate: It is the interest rate multiplied with the debt amount. For example, if a company’s debt has annual interest rate of 10% and the combined state and federal income tax rate is 30%, the after tax rate value is 7%. The computation is as follows:

[10%Interest rate×(100%−30%?tax?rate)]=[10%×70%]=7%

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Answer 3

Question

Chapter 27, Problem 9CRCT

Summary Introduction

To determine: The reason for after tax borrowing rate is the suitable discount rate to be used for the lease evaluation.

Introduction:

After tax rate: It is the interest rate multiplied with the debt amount. For example, if a company’s debt has annual interest rate of 10% and the combined state and federal income tax rate is 30%, the after tax rate value is 7%. The computation is as follows:

[10%Interest rate×(100%−30%?tax?rate)]=[10%×70%]=7%

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Answer 4

Question

Chapter 27, Problem 9CRCT

Summary Introduction

To determine: The reason for after tax borrowing rate is the suitable discount rate to be used for the lease evaluation.

Introduction:

After tax rate: It is the interest rate multiplied with the debt amount. For example, if a company’s debt has annual interest rate of 10% and the combined state and federal income tax rate is 30%, the after tax rate value is 7%. The computation is as follows:

[10%Interest rate×(100%−30%?tax?rate)]=[10%×70%]=7%

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Answer 5

Chapter 27, Problem 9CRCT

Summary Introduction

To determine: The reason for after tax borrowing rate is the suitable discount rate to be used for the lease evaluation.

Introduction:

After tax rate: It is the interest rate multiplied with the debt amount. For example, if a company’s debt has annual interest rate of 10% and the combined state and federal income tax rate is 30%, the after tax rate value is 7%. The computation is as follows:

[10%Interest rate×(100%−30%?tax?rate)]=[10%×70%]=7%

Answer 6

Chapter 27, Problem 9CRCT

Summary Introduction

To determine: The reason for after tax borrowing rate is the suitable discount rate to be used for the lease evaluation.

Introduction:

After tax rate: It is the interest rate multiplied with the debt amount. For example, if a company’s debt has annual interest rate of 10% and the combined state and federal income tax rate is 30%, the after tax rate value is 7%. The computation is as follows:

[10%Interest rate×(100%−30%?tax?rate)]=[10%×70%]=7%

Answer 7

Chapter 27, Problem 9CRCT

Summary Introduction

To determine: The reason for after tax borrowing rate is the suitable discount rate to be used for the lease evaluation.

Introduction:

After tax rate: It is the interest rate multiplied with the debt amount. For example, if a company’s debt has annual interest rate of 10% and the combined state and federal income tax rate is 30%, the after tax rate value is 7%. The computation is as follows:

[10%Interest rate×(100%−30%?tax?rate)]=[10%×70%]=7%

Answer 8

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Ch. 27.1 - Prob. 27.1ACQ Ch. 27.1 - Prob. 27.1BCQ Ch. 27.1 - What is a sale and leaseback agreement?Ch. 27.2 - Prob. 27.2ACQ Ch. 27.2 - Prob. 27.2BCQ Ch. 27.3 - Why is the IRS concerned about leasing?Ch. 27.3 - What are some standards the IRS uses in evaluating...Ch. 27.4 - What are the cash flow consequences of leasing...Ch. 27.4 - Prob. 27.4BCQ Ch. 27.5 - Prob. 27.5ACQ

Solution Summary: The author explains that the reason for after tax borrowing rate is the suitable discount rate to be used for the lease evaluation.

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