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What to be done in case where question is slient on whether the issue cost on debt finance is tax deductiable or not.
In Okan Co Spet/Dec 2019 the question is silent on tax treatement on issue cost so while calucalting APV in deducted tax benefit from issue cost however, in the solution they have not done the same.As in most Paper AFM questions (especially the question 1’s) a lot depends on the assumptions made (just as it would in real life).
If (as in this question) it is not made clear as to whether the issue costs are tax allowable or not, then provided you state your assumptions (as is required in the question) then you will still get the mark whatever you assumed.
(There is rarely just one correct answer – it depends on the assumptions 🙂 )
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