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hi tutor, I have a question on Burung Co Past paper (AFM specimen). The calculation for financing side:
+ Answer from Kaplan kit : It is based on fund required (NOT included issue cost).
+ Answer from Kaplan study text: The calculation is based on fund required (Has included issue cost).Although the difference from Kaplan kit and Kaplan study text is small. But, I’m confused that the basis for calculation should be included issue cost.
Thanks
It depends on whether the issue costs are being paid out of the funds raised (in which case we need to gross up the amount needed for the investment) or being paid out of existing reserves (in which case we do not need to gross up and it is just a % of the amount needed).
If it is not clear in the question then state your assumption and you will still get the marks 🙂
thanks. But I mean that if the issue cost should be included when the calculation for present value of tax shield for normal loan…. and subsidy benefit of subsidiary loan.
Sorry, I now understand what you mean.
Given that the issue costs have been grossed up, the tax relief should really have been calculated on the grossed up amounts (i.e. on 42,970,000 + 876.94)
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