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Sorry to bother you Sir,
I have a little question about this question Kdat is 4·5% x 0·72=3.24%? insteads of using IRR after taxYear 0 1 2 3 4 5
Price 110.16 -4.248 -4.248 -4.248 -4.248 -109.248using this CF I calculate the Kdat is 2.97%?lead to difference of WACC 0.1%,
Q1?Do I understand correctly? about actual kdat in FM???
Q2?I would like to know if it is straightforward to use Kd*(1-t)=kdat ??? in the AFM exam ?Really thanks!!!
Strictly the answer should have calculated the IRR (and not taken Kd(1-t) because that is only valid if the debt had been irredeemable).
Usually the examiner has allowed the approximation in the past (and the difference of 0.1% is immaterial).
However now that the exam is computer based, it is just as quick to use the IRR function in the spreadsheet provided and calculate it precisely.
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