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hello john
hope you are well
please let me know why in this question we did int work out irr for redeemable loan for cost of debt?
thanks
Strictly, having calculated the market value, the cost of debt should have been calculated as the IRR (and if you did you would still have got full marks).
However, since the market value is very close to the amount paid on redemption, the IRR will be very close indeed to Kd x (1-t). (In cases where the amount paid on redemption is equal to the market value, then the IRR will be exactly equal to kd (1-T).)
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