Explain why the author uses the following formula to explain the amount of money a firm needs to repay an outstanding principal balance

Support your answer with n example that shows how much in EBT a firm in a 30% tax bracket would require to repay $1,000 in principal.
Before-tax cost of debt repayment = (principal repayment) / (1 - tax rate)


While debt interest payments are made before taxes, principal payments are not. Thus, a firm must earn enough in EBT so that after paying taxes there remain sufficient funds to pay the principal. For example, a firm in a 30% tax bracket with a $1,000 required principal repayment would need to have $1,000/(1-.30 ) = $1,428.57 in EBT so that they would have sufficient funds to pay both taxes and principal.

Business

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On September 12, Ryan Company sold merchandise in the amount of $5,800 to Johnson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Ryan uses the periodic inventory system and the net method of accounting for sales. The journal entry or entries that Ryan will make on September 12 is (are):

A.

Sales5,800 
Accounts receivable 5,800

B.
Accounts receivable5,684 
Sales 5,684
Cost of goods sold4,000 
Merchandise Inventory 4,000

C.
Accounts receivable5,684 
Sales 5,684

D.
Accounts receivable5,800 
Sales 5,800
Cost of Goods Sold4,000 
Merchandise inventory 4,000

E.
Accounts receivable5,800 
Sales 5,800

Business

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Business