We noted that, when calculating EVA, you should calculate income as the sum of the aftertax interest

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We noted that, when calculating EVA, you should calculate income as the sum of the aftertax interest payment and net income. Why do you need to deduct the tax shield? Would an alternative be to use a different measure of the cost of capital? Or would you get the same result if you simply deducted the cost of equity from net income (as is often done)?

Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...
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Principles of Corporate Finance

ISBN: 978-0077404895

10th Edition

Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen

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