How is it cheaper to take on debt when taking on a project?
I assume EBT = Earnings before tax.

Take a \$200 project with a 6% return on assets. If 109% equity financed, EBT = \$12 (6% return).

If debt has a cost of 5%, and 50% financed (\$100 borrowed), earns \$12 - \$5 = \$7, or a 7% return on equity. So the rate of return is higher, even though total earnings are less.

However, if interest were not deductible, would need to pay taxes on the \$12 pre-interest earnings, not the \$7, and so rate of return would be lower with a high enough tax rate. (E.g., if the tax rate is 50%, there would be \$2.50 paid on the cash flow required for interest, and the rate of return would be lower than a 100% equity investment.)