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Sfm doubt
when i shd take ko( cost of capital) before tax or after tax in some qus my sir had taken it before tax and some ques after tax....getting confused...
Replies (2)
PAT (Profit after Tax) arrives after deducting Tax from PBT, which should be discounted by Ko (Cost of Capital). Because Ko is arrive by weighted average of Ke & Kd (i.e. We *Ke + Wd * Kd)
Where Kd = Debt Interest rate (1-tax) i.e. interest rate net of tax
Ke = cost of equity
We = weight of equity
Wd = weight of debt
Cost of procuring ,cost of procuring =figure in question is before tax. ##
Cost of capital and cost of component and cost of specific component = figure in question is after tax $$
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