Initial Year Loss Ltd (IYL) made a huge loss (of Rs 60 crores) in the previous financial year. IYL is confident of makin

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Initial Year Loss Ltd Iyl Made A Huge Loss Of Rs 60 Crores In The Previous Financial Year Iyl Is Confident Of Makin 1 (68.36 KiB) Viewed 94 times

Initial Year Loss Ltd (IYL) made a huge loss (of Rs 60 crores) in the previous financial year. IYL is confident of making profits of Rs 10 crores p.a. (assumed uniform) for several years to come. IYL has been advised that the tax regulations allow a set off of the past losses against profits in the future (subject to conditions) thereby attracting a reduced/nil tax liability in future. Further, you were taught in FM course that cost of debt needs to be tax- adjusted for calculating the overall cost of capital. What are the arguments, FOR and/or AGAINST, for doing the tax adjustment for calculating the cost of capital for IYL [5]