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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REASONABLE PERSON is a phrase to denote a hypothetical person who exercises qualities of attention, knowledge, intelligence, and judgment that society requires of its members for the protection of their interest and the interest of others.

CONTRACT RATE OF INTEREST is the interest rate specified in a contract.

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