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Hi sir, im not getting the answer for APV please help me on where im going wrong
Base case npv 5272000.00
Less: PV of issue costs net of tax -607125.7732
PV Tax savings on interest paid 17940566.6
PV of subsidized int ben net of tax -2081105.725
APV 20524335.10I have taken the gross amount of 25296907.22 for my calculations not 24538000
sorry forgot to ask one more q as to why they didnt make issue costs net of tax
The answer should have calculated the tax shield and subsidy benefit on the gross amount, and doing this would have got you full marks.
As far as tax relied on the issue costs is concerned, most question specifically say that the issue costs are not tax allowable. However this question does not state that and so if you had assumed that they were tax allowable you would still have got the marks (but, as always in AFM, state your assumptions 🙂 )
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