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In your lecture, you made us understand that a principal benefit of debt is that debt attracts tax relief.
In BPP kit question 213, I don’t understand why tax relief wasn’t considered in the calculation of the market value of the loan note
It is investors who fix the market value and they are not affected by the company tax.
The tax is only relevant when calculating the cost of debt.
If you watch my free lectures on the valuation of securities you will see that I stress this point.
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