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Can you please confirm when I chose to use the before-tax or after-tax cost of capital?
Im refering to the F9 Sept 2016 specimen exam Q26-30
“Ridag Co has a nominal before-tax weighted average cost of capital of 12% and a nominal after-tax weighted average cost
of capital of 7%.”We always use the after-tax WACC unless specifically told to do otherwise.
It would be nonsense to use the pre-tax WACC unless the question told you to (which is unlikely).
Thank you. I see from the answer now that because the question says ignore taxation this is why we use the before tax weighted cost
“Since taxation and capital allowances are to be ignored, and where relevant all information relating to project 2 has already been
adjusted to include future inflation, the correct discount rate to use here is the nominal before-tax weighted average cost of capital
of 12%.”
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