Notional Cost of capital

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    abidfatima5
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    How is it computed and what is the concept behind it? Do we take tax effect or not?


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    gromit
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    I assume you are talking about EVA. The notional charge for the use of capital is based on the WACC of the company applied to the capital employed.

    The concept is that if the company were on its own and not part of a group it would have to raise its own capital and pay for it.

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