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John Moffat.
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abi712003
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shouldnt the 6% be tax deductable? 6 x 0.7 = 4.2 ?
https://www.youtube.com/watch?v=-BfAxHDUhck
John Moffat
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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).
abi712003
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