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Hi There,
I’ve noticed that in these two questions the WACC calculation is different.
In Coeden, the debt portion of the WACC is multiplied by (1-t)
but in Tisa, its not.Please could you advise?
Best,
B
Multiplying by 1-t is accounting for the tax saving on debt in order to calculate the cost of debt to the company i.e. the after tax cost of debt. (We only multiply by 1-t when it is irredeemable debt. If redeemable debt we should calculate the IRR of the after-tax flows instead, as I explain in my free lectures).
However in Tisa the question specifically says that the 4.5% is already the after tax cost of debt.
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