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Hi everyone. Can someone please explain me whether we include interest expense as a relevant cash flow when appraising NPV because the suggested answers dont include it although they are appraising at WACC. Thanks.
You never include interest payments.
The WACC includes the cost of any debt borrowing and therefore the interest is being dealt with by the discounting – that is why we discount. To subtract the interest payments would mean you were effectively dealing with the interest twice.
I really do suggest that you watch the free lectures on investment appraisal.
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