sample Q4
we apply the cost of capital rate to "Capital held to support the group" and not the capital and not the incremental payments, why isnt the rate applied to the incremental payments?
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we apply the cost of capital rate to "Capital held to support the group" and not the capital and not the incremental payments, why isnt the rate applied to the incremental payments?
Comments
That's cause your cost of capital is basically as it mentions the "cost" of holding capital to support the business. At every period, you hold the **total **capital to support that group, not the incremental capital which correspondingly means that your cost is on the total rather than the incremental amounts