Suppose that the interest rate is 5 , the depreciation rate is 8 , the real price of capital is $10, and the tax rate is 10 a Calculate the tax adjusted user cost of capital b Calculate the tax adjusted user cost of capital if the depreciation rate increases to 10 c Return to the original depreciat...

Suppose that the interest rate is 5%, the depreciation rate is 8%, the real price of capital

Question:

Suppose that the interest rate is 5%, the depreciation rate is 8%, the real price of capital is $10, and the tax rate is 10%.
a. Calculate the tax-adjusted user Calculate the tax-adjusted user if the depreciation rate increases to 10%.
c. Return to the original depreciation rate and calculate the tax-adjusted user if the tax rate falls to 6%.
Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...