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sir, i want to ask for calculating equal annual cost qustion will always tell which discount factor to use before or after tax ? like if both given thn which one to choose ?
They will never tell you the discount factor (you will have to look that up in the tables), but they will tell you the rate of interest to use.
In any investment appraisal questions we use the after tax WACC.I really do suggest that you watch 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.
I mean like before tax 7% and aftr tax 12% .. we will take 12 % unless question say ignore taxation
It cannot ever be 7% before tax and 12% after tax!!!!!
Tax makes the cost of debt lower, and therefore the WACC will be lower.
Also, you cannot possibly be given WACC’s before and after tax (and it could not possibly then say ignore tax!)
Again, I do suggest you watch my lectures on the calculation of WACC.
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