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Notional Cost of capital

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA APM Exams › Notional Cost of capital

  • This topic has 1 reply, 2 voices, and was last updated 13 years ago by AvatarKen Garrett.
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  • November 26, 2012 at 12:45 pm #55767
    Avatarabidfatima5
    Member
    • Topics: 10
    • Replies: 11
    • ☆

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

    November 26, 2012 at 2:41 pm #108767
    AvatarKen Garrett
    Keymaster
    • Topics: 10
    • Replies: 10657
    • ☆☆☆☆☆

    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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