Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Tax complexity and the cost of debt

Tax complexity and the cost of debt Now that debt has replaced equity as the preferred source of finance for many UK companies, the correct calculation of the cost of debt assumes even greater importance than it has done formerly. While financial management textbooks are in agreement on how to calculate the pre‐tax cost of debt, there is much less agreement on how to calculate the after tax cost of debt. The different approaches taken by different authors leave students and practitioners confused and unsure as to how they should proceed. This article explores the calculation of the after tax cost of debt in order to help both students and practitioners to understand the interaction of tax and debt in the current UK environment and to be aware of the limitations of the various simplifications which are made, explicitly or implicitly, in the textbooks. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Applied Accounting Research Emerald Publishing

Tax complexity and the cost of debt

Download PDF
17 pages

Loading next page...
 
/lp/emerald-publishing/tax-complexity-and-the-cost-of-debt-WAlBUy45Ay
Publisher
Emerald Publishing
Copyright
Copyright © 2001 MCB UP Ltd. All rights reserved.
ISSN
0967-5426
DOI
10.1108/96754260180001026
Publisher site
See Article on Publisher Site

Abstract

Now that debt has replaced equity as the preferred source of finance for many UK companies, the correct calculation of the cost of debt assumes even greater importance than it has done formerly. While financial management textbooks are in agreement on how to calculate the pre‐tax cost of debt, there is much less agreement on how to calculate the after tax cost of debt. The different approaches taken by different authors leave students and practitioners confused and unsure as to how they should proceed. This article explores the calculation of the after tax cost of debt in order to help both students and practitioners to understand the interaction of tax and debt in the current UK environment and to be aware of the limitations of the various simplifications which are made, explicitly or implicitly, in the textbooks.

Journal

Journal of Applied Accounting Research – Emerald Publishing

Published: Nov 1, 2001

Keywords: Tax & debt; Students; Practitioners; Approaches

There are no references for this article.