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Hello Mr John,
I am not able to understand when to use the before or after tax of the rate of cost of capital when calculating the market value of the loan note.
Thanks,
We do not use the cost of capital!!!
We use the pre-tax cost of debt to calculate the market value because it is investors who determine the market value.
This is all explained in my free lectures. They are a complete free course for Paper FM and cover everything needed to pass the exam well.
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