ASOp CO dec 09

This topic contains 2 replies, has 3 voices, and was last updated by Profile photo of John Moffat John Moffat 2 years, 9 months ago.

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  • Profile photo of Vipin

    In this question,
    cash flow of financing is discounted at cost of debt and
    cash flow of benefits are discounted at WACC.

    i have seen this only in this question, they are using 2 different discount rates to find NPV.
    why they discount it at cost of debt ?

    Profile photo of acca13

    After tax cost of borrowing is used when you purchase or lease an asset,
    but when accepting a proposal of an investment is in question, we use the WACC

    Profile photo of John Moffat
    John Moffat

    Correct :-)
    (It is only lease buy questions where this problem appears)

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