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标题: Tax element in Cost of Equity [打印本页]

作者: hw0799 时间: 2011-7-11 19:29 标题: Tax element in Cost of Equity

I often see two different formulas for CoE in practice:

CoE = Rf + MP * beta

where either MP is defined as:

1) MP = Rm - Rf

or

2) MP = Rm - Rf * (1-t)

Questions:

- What is the rationale for tax adjusting Rf in formula 2?

- Should Rf be tax adjusted when calulating MP?

- Does anyone know of an article discussing the issue?

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