Morada Co

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September 4, 2019 at 11:38 am #544677
toushiga
Participant
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Hello Sir, For PYQ Sept/Dec 2016 Q1
For proposal 2
As more debt being raised , therefore affect the credit rating, why the answer has not included the extra int after tax due to the lower credit rating on existing debt?

Thanks
September 4, 2019 at 12:32 pm #544714
John Moffat
Keymaster
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The interest actually paid is the coupon rate, regardless of the credit rating.

The MV depends on the investors required rate of return, which is affected by the credit rating and the examiner has done this in his answer.
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