1. In the calculation of cost of debt where the answer sheet have shown that it is 4.9%.
If i'm not wrong, for the calculation of cost of debt, it is
(risk free rate + credit spread ) ( 1 - T )
However why 4.9 does not take into consideration of tax ????
Ask the Tutor ACCA AFM
In DEC 12, COEDEN CO, PART (A)
Because tax is considered in the WACC formula separately.
7y ago#2louellend: Please do not answer in this forum because it is the Ask the Tutor Forum, and you are not the tutor :-). However, please do help people in the other AFM forum.
foeldh123:
The examiner was wrong to refer to the 4.9% as the cost of debt because it is before tax. However the question did not ask for the cost of debt, only the WACC, and as louellend has written, in the WACC calculation the examiner has multiplied by 1-T
Sign in to reply to this topic.