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Wacc question
What is the purpose of calculating the linear interpolation in getting an after tax cost of debt when it is given in the question?But it isn’t given in the question!!
The figure given in the question is the coupon rate. The cost of debt takes into account the tax and the premium payable on redemption.
When it is redeemable debt (as it usually is in the exam) then we always have to calculate the IRR.
This is all explained in detail, with examples, in my free lectures.
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