OpenTuition.com Free resources for accountancy students
Free ACCA lectures and course notes | ACCA AAT FIA resources and forums | ACCA Global Community
I understand that when using actual (inflated) cash flows, we should discount with an actual (nominal) rate of return that includes the inflation premium, and not the real rate or event the bank borrowing rate that was used by the trainee accountant.
But, since we’ve calculated after-tax cash flows, shouldn’t we also use an after-tax nominal interest rate? Shouldn’t we adjust the 12% figure provided by the Fisher formula for the tax effect? i.e. multiply by (1 – T) or 0.70 to get an after-tax nominal rate of 8.4%?
We bring tax into the cash flows simply because tax itself is a cash flow and we want to get the actual net cash flows.
Then we discount at the actual cost of money. I don’t know if you have studied weighted average cost of capital yet, but when calculating the cost of debt we do indeed take account of the tax relief on the interest and calculate it after tax (but this has nothing to do with the cash flows themselves – it is simply that the tax relief on the debt makes the borrowing cheaper. However, dividends do not get tax relief and so the cost of equity borrowing is not affected by tax.
Now I get it. All WACC calculations already use an after-tax cost of debt, and of course a flat cost of equity and since WACC is a composite of these two, it already includes the tax effect!
Thank you Sir.
You are welcome
that was so understandable!a really great job!please if you are able,could you help us with more ?
There seem to be a playback problem for many people. Please fix it. Having tried different browsers on different devices (PC/Laptop/Phone/Tablet) both at work and home, I’m pretty sure it’s the website problem. Otherwise very helpful.
Not so many people I am afraid, You are in a small group, who happen to have some problems.
I appreciate that you have tried different devices – still, you need to be more specific..
for example, phone/tablet – was it android – with latest updates google removed flash player support and you have to install extra software to play again the lectures…
at work – you are most likely behind a corporate firewall – so talk to your local administrator to enable video streaming.
and sometimes ISPs also block video streaming
I can’t and not going to cover every possible case for your video playback failure.. since I have no details,
Please visit the support page: http://opentuition.com/support/
Thanks for your reply. Like you I didn’t want to write a long essay with all details, but only to highlight the issue. I would like to think thatI have enough computer knowledge to understand the basics. But, no the problem is not with flash or firewall, as I can watch videos most of the time. But some days, like yesterday it would stop playing and keep loading for 15 to 30 minutes. Restarting browser, computer or even my router didn’t fix it. Just had to wait about an hour and a few unsuccessful attempts before I could finish the question.
Tablet is iPad2, computers are Windows 7 (32 and 64 bit) adsl routers with all necessary permissions assigned in firewalls. Browsers used latest versions of firefox, chrome and IE. Mobile Samdung S4. Everything is up to date. Network speed 5-7mb dl 0.3-0.5 up, and at work double that.
Again I don’t mean to be ungreatful as no payment is required for your service. Thanks again.
Hi, of course, we are annoyed if the videos do not work properly, does not matter if it is free or paid!
thanks for follow up, at least it does say, that lectures did work so it’s not totally black hole
we do not host stream videos from our bedrooms but use professional video streaming service with servers around the world.. and I suppose (well, it’s a fact) last few days there were lots more request than normal. since it’s exam time.. so maybe that explains your problems.
however, there is nothing we can do about it, try it like you did, at different times, and in the future, do not leave it to the last minute before the exams.. start earlier..
good luck in June exams
Thanks a lot. Helped me save time understanding inflation and tax in investment appraisal
Excellent and very useful. Thanks a lots.
lECTURE VERY USEFUL. THNX TO OT
Quite interesting but the vedeo stopped as soon as iwas about to follow the calculations please advise
press ‘play’ again, it should restart where it stopped
This is brilliant, so clear and understandable. thumbs up for ot
You must be logged in to post a comment.
ACCA F1 /FIA FAB Dec 2013 Exam was...
F5 Dec 2013 Exam was... Post comments
F6 Dec 2013 Exam was... Post comments
F7 Dec 2013 Exam was... Post comments
F8 Dec 2013 Exam was... Post comments
F9 Dec 2013 Exam was... Post comments
P4 Dec 2013 Exam was... Post comments
P5 Dec 2013 Exam was... Post comments
P6 Dec 2013 Exam was... Post comments
P7 Dec 2013 Exam was... Post comments
FIA MA1 exam was...
FIA FA2 exam was...
FIA MA2 exam was...
FIA FTX Exam was...
FIA FFM exam was...
Return to top of page
Copyright © 2013 · Privacy and Cookies · Advertising · Contact us · Sitemap · Log in