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Specimen exam 2016 Q 27

MMarina10y ago
Dear Tutor, could you please help me why do we have to use the before - tax average cost of capital and not after - tax to calculate the equivalent annual cost ?
John MoffatJohn MoffatTutor10y ago#1
It is because the question says to ignore tax (and the answer states this as well in the first line) :-) Usually we would use the after-tax cost of capital, but here the question tells you to ignore it.
MMarina10y ago#2
Thank you very much for your quick reply.
John MoffatJohn MoffatTutor10y ago#3
You are welcome :-)
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