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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › reedemable debt – example 8 – cost of debt
shouldnt the 6% be tax deductable? 6 x 0.7 = 4.2 ?
https://www.youtube.com/watch?v=-BfAxHDUhck
Tax is not relevant when calculating the return to investors (in part (a) of the question) because investors are not affected by company tax.
It is relevant when calculating the cost of debt to the company (because the interest does save tax).
I explain this in the lectures working through both parts of the question (and the answer is of course printed in the free lectures notes as well).