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Professor Anthony suggests that the cost of equity should be taken into account and allocated to operations like other costs. Anthony argues that accounting principles concerning interest should he identical to accounting principles concerning economics and that accounting for the cost of capital would define “accounting profit” in the same way that “economic profit” is defined.
This research examine the information content of financial statements which were adjusted according to the Anthony's proposal. A laboratory experimental environment consisting graduate & undergraduate accounting students are designed to test the participant decisions. The test results indicate no statistically significant effect upon decisions or predictions.