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Firstly, thanks for your invaluable help, time and patience, sir! 😀
Secondly, my question might sound a lil daft, but please do enlighten me on why the kit is treating the issues the way it has treated them.
Thirdly, I have the following questions:
1) In the int rate swap, we are considering the after tax bank charge of £120,000, which amounts to £84,000. Going by this logic, why are we not considering the after tax savings in int?2) When computing the PV of the savings from the swap, why are we not considering the annual bank charge of £120,000?
I don’t know which book you are using, but the answer that I am looking at for part (b) does take the after-tax interest savings.
With regard to part (c), certainly you could have taken off the bank charges and looked at the net saving (the answer I am looking at has only looked at the interest saving, which is what the examiner did in his answer). So either would be fine, but the comment would be the same whichever.
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