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Can you please confirm why we never include interest payments even though they are a cash flow and are allowable for tax
Because interest is accounted for when we discount – the whole purpose of discounting is to account for the cost of capital, and the interest on debt (after tax relief) is including in the calculation of the weighted average cost of capital.
This is all explained in my free lectures – the lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.
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