Issue cost

This topic has 3 replies, 2 voices, and was last updated 4 years ago by John Moffat.

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November 13, 2021 at 11:40 pm #640585
humai
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Sir in APV Qs, do we always deduct issue cost of debt or equity from base case NPV, whether it is tax allowable or not?
November 14, 2021 at 7:47 am #640596
John Moffat
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As I explain in my lectures on this, issue costs will always make the APV lower.
It doesn’t really matter whether they are deducted in the calculation of the base case NPV or deducted after calculating the base case NPV (as we usually do). The end result will obviously be the same.
November 14, 2021 at 7:47 pm #640641
humai
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Ok but issue cost of debt or equity will always be deducted na in order to arrive at APV, regardless of whether Qs mentions that issue cost is tax allowable or is not tax allowable?
November 15, 2021 at 8:23 am #640675
John Moffat
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Yes – they will always be deducted (if they are tax allowable then obviously only the after-tax amount will be deducted).
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