As mentioned in the text, Cost of debt uses post-tax interest expense in the calculation but YTM uses pre-tax interest income in the calculation. Can you please help me understand why is this the case (logical reasoning)?
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YTM | Ch 2
6y ago#1Hi,
The cost of debt is the cost of debt to the company, whereas the YTM is the return on the bond itself to the individual/holder. The company then saves the tax on this, giving the cost of debt.
Thanks
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