In a merger model, why do you calculate the after-tax cost of cash? I get for debt, you look at the after-tax cost of debt b/c interest expense is tax deductible. Not sure why for cash - is interest income tax-deductible as well?
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You have to pay tax on the interest income from cash, which I assume is in a high-yield account.
Not wrapped up in the money market?
interest is tax deductible my guy
…interest EXPENSE lowers taxable income. Interest income is income.
Since you're referencing a merger model, are you trying to get to EPS accretion? If so, you'll need the after-tax effect of changes. So here, you'd want the after-tax amount of interest income to calculate the proforma net income.
On another note, interest income is tax deductable just like interest expenses.
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