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Sir by any chance have you got this question its in mock 1 of bpp.And one thing more i wanted to ask some time we use ke (from capm) for discount factor and somefime we go ahead and find wacc for using in discount factor,how do we know which one to use.Many thanks will be troubling you for couple of days more sir.
If you are calculating NPV of a project you discount at the WACC.
If you are asked for the APC then you get the base case NPV by discounting at the cost of equity if there was no gearing (and adjust for the tax shield separately).If you are using free cash flows, you discount at the WACC (to get the value of the business).
If you are using free cash flows to equity, you discount at the cost of equity (to get the value of the equity).
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