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2014 June Q2

This topic has 1 reply, 2 voices, and was last updated 10 years ago by John Moffat.

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September 25, 2015 at 4:43 am #273463
yanchen15
Member
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Dear Sir,
I do not understand how the annual subsidy benefit is calculated in the financing side effects. The answer given is
Annual subsidy benefit $42,970,000 x 60% x 0·025 x 80% = 515·64
I do not understand why 10-year government debt yield rate 2.5% used here, and what 80% means in the calculation.
Appreciated your help in advance.
September 25, 2015 at 7:30 am #273478
John Moffat
Keymaster
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The 2.5% isn’t the government debt yield rate (that is just a coincidence). It is the difference between the normal borrowing rate of 4% and the subsidised rate of 1.5%. So the subsidy is 4 – 1.5 = 2.5%.
The 80% is (1 – tax rate of 20%)
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