Bank on interest rate being charged on the companys debt

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Reference no: EM131456331

As your company's chief financial officer, you are negotiating with the bank on the interest rate being charged on the company's debt. At this time, the company has $200,000 in long-term debt, at an interest rate of 7%. If you can negotiate a new interest rate of 6%, to reduce the amount of interest expense the company must pay, what will happen to NOPAT next year? NOPAT will be higher by the amount of the interest savings. NOPAT will be higher by the amount of the after-tax interest savings. Operating NOPAT will be the same, but financing NOPAT will be higher. The change in interest rate will have no effect on NOPAT. The effect on NOPAT will be a big mystery.

Reference no: EM131456331

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