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Please can I check when is it appropriate to deduct tax when calculating interest on a redeemable bond and when is it not?
In future you must ask in the Ask the Tutor Forum if you are wanting me to answer – this forum is for students to help each other.
When determining the cost of debt to the company then we take the after tax interest when calculating the IRR.
When determining the investors required rate of return we use the before tax interest when calculating the IRR (because the investors are not affected by company tax).
This is all explained in detail in my free lectures. The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
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