Question
How is the after-tax cost of debt calculated?
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Answer
Pre-tax debt cost times 1 minus the tax rate.
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Question
How does reducing days sales outstanding affect liquidity?
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Answer
It frees cash from receivables faster.
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Question
Why can IRR and NPV give different rankings for projects?
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Answer
IRR assumes reinvestment at the IRR, while NPV does not.
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Question
Why does debt financing often lower the cost of capital?
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Answer
Interest is tax-deductible, creating an interest tax shield.
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