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Sfm doubt

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SWATI KAUSHIK

chartered Accountant

269 Points Joined August 2011

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)

Guest

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

CMA.Manikanta

Grad-CMA &CA-Final

314 Points Joined October 2009

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 $$ MEMORIZE THE TERMINOLOGY U WIL GET IT... ALL THW BEST