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Past year Sept/Dec 2021 (Scenario 1)

This topic has 5 replies, 2 voices, and was last updated 3 years ago by John Moffat.

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August 14, 2022 at 3:29 pm #663057
Ron123
Participant
- Topics: 72
- Replies: 93
Hi. For sample answer Appendix 3, for the subsidized loan, please may I know why there is a tax shield lost? Shouldn’t a subsidized loan have a tax shield?
Thank you.
August 14, 2022 at 4:23 pm #663070
John Moffat
Keymaster
- Topics: 57
- Replies: 54835
The subsidised loan does have a tax benefit. What is lost is the tax benefit on the difference between the normal interest rate and the subsidised interest rate.
August 15, 2022 at 11:59 am #663124
Ron123
Participant
- Topics: 72
- Replies: 93
Oh I see. So, it is the opportunity cost?
August 15, 2022 at 8:34 pm #663148
John Moffat
Keymaster
- Topics: 57
- Replies: 54835
Effectively yes.
August 16, 2022 at 11:21 am #663183
Ron123
Participant
- Topics: 72
- Replies: 93
I see. Thank you! 🙂
August 17, 2022 at 8:00 am #663232
John Moffat
Keymaster
- Topics: 57
- Replies: 54835
You are welcome 🙂
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