While computing the cost of equity using the formula , rs=D1P0+grs=D1P0+g, we do not make any adjustment to express the cost of equity on an after-tax basis whereas while computing the cost of debt, a tax adjustment is required to arrive at after-tax cost of debt. Why is this so?

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The reason for the difference in treatment between the cost of equity and the cost of debt when it comes to tax adjustments is rooted in the fundament... View the full answer