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I have some question in 1(iii),evaluate the economic value added.The answer show that there has the lost tax relief on interest and deduct from the operating cost.But why we don’t add back the interest after tax (80%×801000) and where the lost tax relief on interest arise?
2.1 of tax was paid, but that figure would have been calculated after the deduction of tax relief on interest. If we are calculating NOPAT this is before interest and the appropriate tax amount is before interest too. The tax therefore needs to be increased by the tax rate x interest.