ASOp CO dec 09

This topic contains 2 replies, has 3 voices, and was last updated by Profile photo of John Moffat John Moffat 1 year, 10 months ago. This post has been viewed 230 times

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  • Profile photo of Vipin
    Vipin
    Participant
    • Topics: 96
    • Replies: 337

    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
    acca13
    Participant
    • Topics: 48
    • Replies: 135

    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
    Keymaster
    • Topics: 3
    • Replies: 6854

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

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