Required Return calc - only withdrawals are taxed?

CFA Level III Portfolio Management
#1

Hi Guys

I have a question regarding how to calculate a clients required return when only the withdrawals are taxed.

One question I was doing earlier asked for the pre-tax required return. I calculated this fine, but in the following question I was asked to calculated the pre-tax required return if only withdrawals are taxed.

The difference in the calculation was that inflation was added after we had divided the return by 1-Tax rate.

Normally we add the inflation before we divide.

Can someone please explain the reasoning behind this? Thanks.

#2

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#3

Thank you :slight_smile: