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Hi John,
I came across a lecture in your revision for Q sept 2016 paper question 21-25 in the calls you mention we can claim tax relief! Is this because the Q is about an investors interest in a company and if a company is offering investment then they get the tax relief?
Thank you
BronwynI am not sure what you mean when you say “in the calls you mention we can claim tax relief”.
Tax relief is not relevant in these questions. If the question had asked for a calculation of the cost of debt then it would have been relevant because the company gets tax relief on the interest payment on loan notes.
However that is irrelevant when calculating the market value of debt because that is fixed by investors and they are not affected by company tax.
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