discounting rate for calculating present value

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CA Anshu Agarwal (Querist)
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26 January 2010 the future cash flows are discounted to the present value using the required rate of return.
which rate of return should be taken for this purpose, before tax or after tax?

thanks

Kapil Arora

Kapil Arora (Expert)
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26 January 2010 Anshu i would like to restate ur question u already mentioned that it required ur req rate of return.... U hv to take at least risk free return nd depends upon ur investment or industry specific that what u can earn if u deploy funds elsewhere

CA Anshu Agarwal

CA Anshu Agarwal (Querist)
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27 January 2010 required rate of return shall be equal to cost of capital.

cost of capital is considered after tax.

So the rate of return shall be taken after tax for computing the Present value of cash flow after tax.

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CA Anshu Agarwal

CA Anshu Agarwal (Querist)
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27 January 2010 thanks sir,
my query has resolved by it-self.