Question

What is the after tax rate of return on a perpetuity?

Answer 1

The after-tax rate of return on a perpetuity can be calculated by multiplying the before-tax rate of return by the after-tax rate.

Step-by-step explanation:

The after-tax rate of return on a perpetuity refers to the rate of return on an investment after accounting for taxes. To calculate the after-tax rate of return on a perpetuity:

1. Calculate the before-tax rate of return on the investment.
2. Calculate the tax rate as a decimal (e.g., 30% = 0.30).
3. Subtract the tax rate from 1 to get the after-tax rate (e.g., 1 - 0.30 = 0.70).
4. Multiply the before-tax rate of return by the after-tax rate to get the after-tax rate of return.

For example, if the before-tax rate of return is 10% and the tax rate is 25%, the after-tax rate of return would be 10% * (1 - 0.25) = 7.5%.