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There is a question Ridag Co in the specimen F9 [Sept 2016 specimen exam Q26-30] where the before-tax cost of capital is used rather than after-tax which is mostly used.
It is the question asking about the equivalent annual cost of machine 1 where it used before-tax WACC?
Can you please confirm when I choose to use the before-tax or after-tax cost of capital? and what is the reason behind choosing one over the other?
We always (not ‘mostly’!) appraise protects by discounting at the after-tax WACC, unless the question says to ignore tax.
This question says to ignore tax 🙂
Thanks 🙂
I want to ask you a stupid question maybe but it is better to ask than regret it.
In the Lease & Buy chapter in your lectures, you called the NPV as PV in your lectures even though you have already deducted the cost of lease or buy that happened in the year 0. The same thing is done in the ASOP Co [Dec 2009] answer where it has calculated PV less cost of lease or buy = PV (not NPV). Isn’t that strange!
Please clear the confusion.
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