Page 323 - FM Integrated WorkBook STUDENT 2018-19
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The cost of capital
4.4 Redeemable debt
Investor return (k d) can be found by calculating the IRR of the
investment cash flows:
T 0 MV (x)
T 1 – n Interest payments x
T n Capital repayment x
Cost of debt (k d(1 – T)) to the company can be found using:
T 0 MV (x)
T 1 – n Interest payments × (1 – T) x
T n Capital repayment x
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