why is interest expense said to cost the firm substantially less than the actual expense, while dividends cost

Question

it 100% of the outlay?

Answer 1

Interest is a tax deductible expense and is said to provide an "Interest tax shield" while dividends are paid out of net income (post tax).

This is also why Republicans like to lobby for a tax rate of 0%. They are claiming that otherwise it is double taxation - the company pays taxes on the income become dividends are distributed and then shareholders pay taxes on the dividends after they receive them.

Answer 2

I believe that interest expense is a tax deductible expense while dividends are not.