Answer:
$210,000
Explanation:
Cost of Borrowings (Interest expense) = Amount of Borrowings * Rate of Interest = $3,000,000 * 10% = $300,000
Tax on Borrowings = Cost of Borrowings * Rate of tax = $300,000 * 30% = $90,000
Net Cost of Borrowings = Cost of Borrowings - Tax on Borrowings
Net Cost of Borrowings = $300,000 - $90,000
Net Cost of Borrowings = $210,000
So, the annual net cash cost of this borrowing if the income tax rate is 30% is $210,000.
