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Valuation of Debt

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Valuation of Debt

  • This topic has 3 replies, 2 voices, and was last updated 5 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • August 4, 2019 at 2:52 pm #526176
    ikmughal28
    Participant
    • Topics: 66
    • Replies: 63
    • ☆☆

    Hi
    My question is in valuing debt either irredeemable or redeemable/convertible, do we need to consider tax if its given in the question and calculate after tax interest or we do not consider tax at all even if its given?

    Thanks

    August 4, 2019 at 3:22 pm #526186
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54655
    • ☆☆☆☆☆

    When calculating the MV of debt, tax is not relevant. It is investors who determine the MV and they are not affected by company tax. Tax is only relevant when calculating the cost of debt to the company.

    I do stress this in my free lectures on the valuation of securities.

    August 4, 2019 at 3:29 pm #526189
    ikmughal28
    Participant
    • Topics: 66
    • Replies: 63
    • ☆☆

    Thanks a lot

    August 4, 2019 at 7:01 pm #526207
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54655
    • ☆☆☆☆☆

    You are welcome 🙂

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