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discount rate for a project

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › discount rate for a project

Viewing 2 posts - 1 through 2 (of 2 total)
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  • March 7, 2017 at 11:47 am #376218
    lovelandmusic
    Member
    • Topics: 7
    • Replies: 4
    • ☆

    I just went through the revision lecture on discount rate for a project on this site, What rate do we use if the project is financed entirely by debt?

    March 7, 2017 at 2:14 pm #376267
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54500
    • ☆☆☆☆☆

    You would use the APV approach.

    Discount at the ungeared cost of equity and then add on the tax shield on the debt.

    APV is always the better approach if there is a big change in the gearing.

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