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Hi Dear Tutor, I have a question.
How can I know that cost of bank loan?6% has been given but If it is coupon rate not cost of debt?
Thanks in advance
As the examiner states in his answer (and as I explain in my lectures) bank loans do not have a market value – the cost of the loan to the company is the 6% less tax relief and the ‘market value’ in the calculation of the WACC is the amount of the loan.
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