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Rdemption yield

This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.

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November 25, 2016 at 8:46 am #351364
cyh
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hen we calculate the redemption yield / IRR for bond, do we need to consider the tax effect?
in what situation we need to consider the tax shield on interest payment?
November 25, 2016 at 2:22 pm #351418
John Moffat
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The redemption yield is the return to the investor, and is therefore the IRR of the flows ignoring the tax.
The cost of debt is the cost to the company, and is therefore the IRR of the flows after the tax saving on the interest.
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