If the real interest rate is 4 percent, the depreciation rate is 10 percent, the tax rate is 0 percent, and capital gain is 1 percent, the user cost of capital is 13 percent.

Question

Quizplus · Accepted Answer

The user cost of capital is calculated as follows:
User cost of capital = (Real interest rate + Depreciation rate - Capital gain) x (1 - Tax rate)
= (4% + 10% - 1%) x (1 - 0%)
= 13%

If the Real Interest Rate Is 4 Percent, the Depreciation