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Hello! I have a problem with APM. You know thic model cosiders tax shield effect differ from the equity finance. Problem arises in calculating the effect from government subsidied loans whicn are normally provided at thelower rate. Answers to the questions about APV calculetion give two additives: tax effect based on the loan rate and tax effect on savings due to difference between market ann government rate. I think there is a double calculation of the lower rate effect cause tax shield effect in the subsided loan is already included in the first mentioned additive. Isn’t it?
I think it should be interest saved due to difference between mkt and cheap loan, tax effect on savings are not calculated.
yes, sure. But this is a little bit strange. We must consider subsided loan as a kind of unmarketable loan and, thus, shuold take into consideration lost tax shield on the difference between two rates. But I think that it would be better to consider subsided loan as a separate source of debt rathen then as a loan given at unmarketable rate. So, I think subsided loan is a separate kind of debt with its own rate and tax shield. Isn’t it?
yes, I think the loss tax shield b/w cheap loan rate and normal loan rate should be deducted from the base case NPV. It is easily ignored.
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