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ADJUSTED PV

Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › ADJUSTED PV

  • This topic has 1 reply, 2 voices, and was last updated 13 years ago by 11ish.
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  • October 24, 2011 at 6:59 am #50207
    abbas ali
    Member
    • Topics: 9
    • Replies: 57
    • ☆☆

    IN CALCULATING TAX SHIELD ON DEBT.

    WE ADD ISSUE COST ON DEBT OR NOT.

    FOR EX 250,000 FOR DEBT AND ISSUE COST IS 2%

    SO HOW WE CALCULATE THE TAX SHIELD?

    TAX RATE 25%

    October 27, 2011 at 5:12 am #89051
    11ish
    Member
    • Topics: 1
    • Replies: 14
    • ☆

    There is a detailed example in kaplan on this. Nevertheless, you have to add issue costs. If you are assuming that 250k is NET of issue costs, it is 98% of the total debt you raise. What you actually raise is 250k * 100/98. Tax shield is then calculated on this amount.

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