Pre-tax After-tax
Year Year
0 -95 0 -95
1 4 1 3.32
2 4 2 3.32
3 4 3 3.32
4 104 4 103.32
IRR 5.4% IRR 4.7%
With tax rate at 17%, I have calculated after-tax coupon payments to be 4 x 0.83 = 3.32. The second table gives me after-tax market yield of the bond at 4.7% whereas the first table gives me 5.4% x 0.83 = 4.5%. Which method is correct and why?
Thanks