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after/b4 tax debts

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › after/b4 tax debts

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by John Moffat.
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  • May 24, 2022 at 3:23 am #656298
    AFNAAAN
    Participant
    • Topics: 36
    • Replies: 23
    • ☆☆

    while finding mv of debts should ve use b4 tax cost of debt or after tax cost of debt for dicounting the cfs?

    and while finding mv the interests are its cf ryt, interest how should v record?direct interest amount or interest after deducting tax??

    May 24, 2022 at 1:04 pm #656328
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    It is the investors who determine the market value and they are not affected by company tax. Therefore we use the future receipts before tax and we discount at the investors required rate of return (which is effectively the cost of debt before tax).

    This is often asked in the exam which is why I stress it in my free lectures!

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