Sir What’s the difference between
post tax of burrowing
and
pre tax of burrowing
And secondly what’s the benefit of it
Ask the Tutor ACCA FM
Lease or buy decisions
4y ago#1The pre-tax cost of borrowing is the interest paid on the borrowing before any tax affect.
Interest is tax allowable for companies and so the post-tax cost of borrowing is the cost to the company after taking account of the tax saving.
We always use the after-tax cost to the company in investment appraisal, and the calculation of it is all explained in my lectures on the cost of capital.
Sign in to reply to this topic.