Question: Why do I have to include in the cost of debt also the sinking factor and not just the interest rate, as is done in the WACC (there I also include the tax effect)? Many thanks.
Because the cash flows in real estate have the financing cost baked into the cash flows themselves. Elsewhere the cash flows do not include the tax advantages of financing. So in real estate the financing advantages are in the cash flows so they are NOT included in the WACC. Everywhere else the tax advantages are not in the cash flows so they are included in the WACC
By the way, the sinking fund factor is to reflect that fact that the debt is amortizing. Everywhere else it is assumed to be bond debt so only int is paid
Thecodont Wrote: ------------------------------------------------------- > By the way, the sinking fund factor is to reflect > that fact that the debt is amortizing. Everywhere > else it is assumed to be bond debt so only int is > paid [] bad [] good [x] perfect