anonymous
  • anonymous
Is the cost of equity calculated from the CAPM model, pre -tax or post-tax. I think it is post-tax but cannot come up with a proper rationale. Can anyone help?
Finance
chestercat
  • chestercat
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anonymous
  • anonymous
Post -tax. because the Beta is calculated using post-tax returns
anonymous
  • anonymous
It is post-corporate but pre-personal tax. The equity risk premium and risk free rate are to the investor, not the corporation.. and the corporation has to deliver returns from post-tax earnings.

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