Wrong answer on WSO 400 IB technicals or am i tweeking?
Why isn't tax rate taken into account here to adjust the cost of debt, thus doing (1-tax rate) for the second body of the WACC
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You’re right — the cost of debt in WACC should be adjusted for taxes by multiplying by (1 - tax rate), since interest is tax-deductible. The guide incorrectly leaves that out, which would overstate the WACC. Good catch — that’s an important detail for proper valuation.
thought so, thx for confirming
The cost of debt ultimately includes the tax shield. The answer could be written more clearly to specify this.
well we don't know that for sure tho right? they didn't even specify a tax rate to begin with so i doubt it
Yeah as long as you understand the concept of multiplying by (1-tax rate) to get your after tax cost of debt you’re good.
old guide / too simplistic
don't give it too much thought
Wait so you're saying that's a bad place to hone your technicals? and wdym by simplistic? Is the real thing much harder/complex?
In general the WSO one doesn't have that much depth to help you understand - no it's not that much harder/complex in actual interviews but to learn there are better ones out there. Would use WSP Red Book - 100x better.
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