When calculating before-tax return objective, which way is correct? Before-tax real return + inflation or (After-tax real return + inflation)/(1-tax rate) I’ve seen cases that use both methods. But which method should I use for the exam? Anyone knows?
before tax return requirement = (required return + inflation) / (1-tax) and the “required return” inside the formula is the one you calculate as spending needs divided by total portfolio, etc
thanks, hala. I also think that method is more appropriate. Some sample questions use the first method though.