COST OF DEBT Definition

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COST OF DEBT is interest rate times 1 minus the marginal tax rate (because interest is a tax deduction). An increase in the tax rate decreases the cost of debt.

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BREAK-EVEN POINT is the volume point at which revenues and costs are equal; a combination of sales and costs that will yield a no profit/no loss operation.

EARNING CAPACITY is the net average earnings at a given moment in time: past, current or future.

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