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John Moffat.
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pearluwera
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Hello Sir ,
Help me on the subsidy benefit
This is my way help know we’re am going wrong
Subsidy befit
30.6 *(4.329-0.952)*(0.05-0.022)*(0.7)=2.03John Moffat
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You need to keep the interest saving and the tax effect separate, because there is a 1 year delay on tax.
So the subsidy ignoring tax is from years 1 to 4, so just use the 4 year annuity factor for this.
However the tax on it is from years 2 to 5, and for that the discounting is as you have written.
pearluwera
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Thank you Sir ,now it is so clear
pearluwera
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Hello Sir also help me on the tax shield on the loan
How did the examiner derive this (0.025-0.003)John Moffat
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The question says that interest would be payable at 30 basis points (i.e. 0.03) less than the risk free rate of 2.5%.
pearluwera
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