Mythier plc, in its first year, produced profits after deduction of tax but before deduction of interest

Question:

Mythier plc, in its first year, produced profits after deduction of tax but before deduction of interest of £lm. The amount invested by debt holders was £4m. Equity holders also invested £4m. Interest paid during the year was £0.24m and the weighted average is 8 per cent, while the capital is 10 per cent.
a. Calculate economic profit using the entity approach,
b. Calculate economic profit using the equity approach.
Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...