Question

Problem 9-52 Part-b (Static) b. $800 of interest on a short-term loan incurred in September and repaid in November. Half of the loan proceeds was used immediately to pay salaries and the other half was invested in municipal bonds until November After-tax cost

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Answer 1

After-tax cost $652

Step-by-step explanation:

$652 = $800 [1 − (0.5 × 0.370)]. Half of the interest is not deductible because it was used to purchase tax-exempt securities.