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Lease or buy decisions

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Lease or buy decisions

  • This topic has 1 reply, 2 voices, and was last updated 5 months ago by John Moffat.
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    Posts
  • January 5, 2022 at 11:49 am #645339
    johnbriane
    • Topics: 146
    • Replies: 147
    • ☆☆☆

    Sir What’s the difference between
    post tax of burrowing
    and
    pre tax of burrowing

    And secondly what’s the benefit of it

    January 5, 2022 at 2:38 pm #645350
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49622
    • ☆☆☆☆☆

    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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