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question :
how should AB Co treat the interest payments and what discount rate should it use?answer :
after tax cost of the loan if they borrow and buy (yes)
after-tax cost of the loan if they borrow and buy (no)
weighted average cost of capital (yes)
weighted after cost of capital (yes)my question here :
1. what is the difference between “after tax” and ‘after-tax”?
2. all weighted are suitable for discount rate?AB Co should treat the interest payments as an expense and deduct them from their taxable income. This is because interest payments are tax-deductible expenses for businesses.
If AB Co decides to use the weighted average cost of capital (WACC), they should use the after-tax WACC. The WACC represents the average cost of financing for the company, including both debt and equity, and the after-tax WACC accounts for any tax benefits from interest deductions.
i got that interest is tax deductible, but what i want to know is what is the difference between “after tax” and ‘after-tax”. ‘after tax’ is deducted and ‘after-tax’ is interest, is it right?
After tax refers to the amount of money or income that remains after taxes have been deducted. It represents the net amount that an individual or company receives after paying their tax obligations.
Whilst after-tax is used to describe something that has already had taxes taken into account – interest amount that has already been adjusted for taxes.
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