## Answers

**Answer :**

a. | Tax savings | $29400 |

After tax cost of interest | $110600 | |

b. | Tax cost | $29400 |

After tax earnings | $110600 | |

c. | Tax cost | $51800 |

After tax earnings | $88200 | |

e. | Tax cost | $10290 |

After tax earnings | $129710 | |

f. | Tax cost | $21000 |

After tax earnings | $119000 |

**Working Notes**

**(a). Tax savings = 140000*21% = 29400**

**After tax cost of interest = 140000 - 29400 = $110600**

**(b). Tax cost = 140000*21% = 29400**

**After tax earnings = 140000 - 29400 = $110600**

**(c) Tax cost = 140000*37% = 51800**

**After tax earnings = 140000 - 51800 = $88200**

**(e). Tax cost = 140000*(1 - 65%)*21% = 10290**

**After tax earnings = 140000 -10290 = $129710**

**(f). Tax cost = 140000*15% = 21000**

**After tax earnings = 140000 -21000 = $119000**

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