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Hello sir ,
One question please , if for example we were given the debt capacity increase and the actual amount of fund raised ( we will take the increased debt capacity to calculate the tax sheild , but for the purpose of calculating issue cost will it be based on increase capacity or the debt used ?
Thanksq2) if the debt capacity increase to 1200 m ( half of the finance is in from debt and half from subsidies gov loan ) , the tax shield on both debt and subsidies loan will be based on the increase capacity ?
First question:
You would calculate the issue cost just on the debt raised.
Second question:
I very much doubt that the examiner would do this, but you would calculate the tax shield on the actual amount of the subsidised loan, and for the rest of the increased capacity do is though all a normal loan.
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