Why is the depreciation of capital a cost to the firm that borrows it? Surely they just pay interest and return the capital to the lender who has to repair the wear and tear? Or are we assuming the firm keeps the capital and this depreciation cost is lost productivity of the machines?
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Sir ,
Can you explain how the increase in tax rate increases tax adjusted user cost of capital and thus reduces the capital?
Why is the depreciation of capital a cost to the firm that borrows it? Surely they just pay interest and return the capital to the lender who has to repair the wear and tear? Or are we assuming the firm keeps the capital and this depreciation cost is lost productivity of the machines?
Is this the same as Marginal Cost?