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Specimen exam 2016 Q 27

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Specimen exam 2016 Q 27

  • This topic has 3 replies, 2 voices, and was last updated 9 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • August 17, 2016 at 1:29 pm #333771
    boma77
    Member
    • Topics: 70
    • Replies: 97
    • ☆☆

    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 ?

    August 17, 2016 at 3:11 pm #333783
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54752
    • ☆☆☆☆☆

    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.

    August 18, 2016 at 5:30 am #333858
    boma77
    Member
    • Topics: 70
    • Replies: 97
    • ☆☆

    Thank you very much for your quick reply.

    August 18, 2016 at 6:50 am #333884
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54752
    • ☆☆☆☆☆

    You are welcome 🙂

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