Due to this tax benefit of interest, effective cost of debt is lower than the gross cost of debt. FormulaAfter-tax cost of debt can be determined using the following formula:After-Tax Cost of Debt = Pre-Tax Cost of Debt × (1 – Tax Rate)...
Design/methodology/approach – This formula is derived by adjusting the APR provided by the lender for the length of the mortgage, the amount of discount points, the mortgage interest rate, and the borrower's tax rate. Findings – From this formula, it is found that the tax-adjusted APR ...
NOPAT = Net Profit + Net Interest X (1 – Tax rate) As you can see, it’s a pretty simple formula to calculate. Theoperating profit,net income, andinterest expenseshould all be reported on theincome statement. Occasionally, the tax rate is reported on the face of the financial statements...
Using the example above, the after-tax interest rate can also be calculated. The formula for the after-tax rate is: the loan interest rate of 10% minus (30% tax savings on the 10% interest rate) = 10% minus 3% = 7%. Related Questions How do I calculate the amount of sales tax th...
After Tax Cash Flow Formula The formula to calculate the after tax cash flow is as follows. After-Tax Cash Flow = Net Operating Income (NOI) – Annual Debt Service – Income Taxes Where: Net Operating Income (NOI) = (Rental Income + Ancillary Income) – Direct Operating Expenses Annual De...
If the tax rate is 40%, what is the after-tax real interest rate in each of the following cases: the nominal interest rate is 10% and the inflation rate is 5%? If the tax rate is 40%, compute the after-tax real interest rate in the f...
Formula 2 The second NOPAT formula is complex, and it is useful when you do not know your exact earnings before interest and tax. In this case: NOPAT= (Net income + Non-operating income loss − Non-operating income gain + interest expense + tax) × (1 − tax rate) ...
Show numerical formula and computation. Compute the Free Cash Flow given the following data: Earnings before interest and taxes $1 million What is the future value of a series of $5,000 end-of-the-year cash flows to be received forever if the...
To calculate NOPAT, the operating income, also known as the operating profit, must be determined. It includes gross profits less operating expenses, which is comprised of selling, general, and administrative (e.g., office supplies) expenses.2The NOPAT formula is NOPAT=Operating Income×(1−Ta...
while those in neighboring West Virginia, pay a top marginal rate of 6.50%, according to the Tax Foundation. In addition to income taxes, companies may be subject to other state taxes, which can also vary from one state to another.2 ...