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Sir What’s the difference between
post tax of burrowing
and
pre tax of burrowingAnd secondly what’s the benefit of it
The 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.
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