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1. can i understand balancing adjustment as the residual value ? i have seen your video lecture for this question but there doesn’t seem to clear my doubt in comprehending “balancing adjustment
2. just for general knowledge what is the difference between cost of capital and WACC ?
cost of capital is the rate of return compensated to investors while WACC is the rate of return that the company has to pay to all of its’ security holders.
does this mean that cost of capital is same as WACC ???
1. The balancing allowance or charge is the difference between the sale proceeds and the tax written down value. You need to watch my free lectures on this (and the lectures on investment appraisal with tax for Paper FM if necessary, because this is revision of the earlier paper).
2. The cost of capital is not the return to investors – the cost to the company is affected by tax relief on interest payment. The cost of capital is the WACC.
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