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When will we use pre-tax cost of debt and post-tax cost of debt in redeemable, irredeemable convertible loan note and bank loan and why will we do so?
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Post-tax is relevant when calculating the cost of debt, because the company gets tax relief on the interest. Pre-tax is relevant when calculating the market values, because it is investors who determine market values and tax is not relevant to them.
It would help you to watch the free lectures where all the above is explained – particularly the valuation of securities and the cost of capital chapters.
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