(depreciation). The required real pre-tax return is derived from nominal (or real) post-tax required returns. Techniques commonly … characteristics of tax depreciation allowances. There is no general solution to this “transformation problem”, but alternative …

found that depreciation increases the cost of capital before and after tax. Most of their assumptions are maintained …. However, commitment to perpetual reinvestment is in most cases not a reasonable assumption. Without it, depreciation decreases … the cost of capital before and after tax. The effect of depreciation is less in absolute value than in Levy and Arditti …