ap0258

coshair Wrote:
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> bp, pls note the reduction in NI due to annual
> coupon expense is also 50*(1-tax rate)
>
> you may refer to the I/S construction of NI. when
> you calc tax already deduct 50 expense so finally
> the inpact to NI is only 50*(1-tax), which is
> added back in Int(1-t), so FCFF remains no
> change.
>
>
> \\\
>
> bpdulog Wrote:
> --------------------------------------------------
> -----
> > Theoretically there would be no impact, which
> is
> > why the curriculum suggests using the FCFF
> method
> > when the capital structure is unstable.
> >
> > But, if I were to issue $1000 of debt @ 5%, I
> > would have a $50 annual coupon expense which
> > reduces my NI by $50. But we reclaim the tax
> > benefit of this, which comes out to $25 assuming
> a
> > 50% tax rate.

Thanks for clarifying.

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