AuthorTopic: After-tax cost of debt
Max27
@2010-06-22 23:39:35
I understand how the book comes up with the answers to these problems but when I input the numbers into the calculator it seems like the book has the PV and FV numbers backwards.
Ex. Level I, Volume 4, page 87, example 48-4. The book has:
PV=-1025
FV= 1000
N= 20
I= 25

...But shouldn't the PV=1025 and the FV= -1000?

As an investor having PV as a negative is correct because I am "giving" my money to the company and therefore the FV will be positive since it will eventually be returned to me. In this example, though, it is the company that is receiving payment and therefore should have a positive PV and then have a negative FV since it will be giving capital back to the investor
PedroEdmundo
@2010-06-30 06:30:32
Hello,

if I am not wrong, most of the time you have to put yourself from an investor point of view... except if you are doing capital budgeting.

So, even if it is the company that is issuing the bond, the bond pricing is made from the investor (bondholder) point of view.

### CFA Discussion Topic: After-tax cost of debt

To post a new topic or reply to a topic, please log in or register for a free user account.

I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!