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I thought the Loan repayments were to be included in the cashflows in part (a)…the answer does not seem to show any repayments.
You do not include loan repayments or interest on the loan.
The reason is that the present value of the loan repayments and interest when discounted at the cost of the loan will be equal to the amount of the loan.Have you watched my lecture on this?
Thanks John i think i confused myself with an earlier question where they asked for cashflows and the loan repayments were included in the answer.
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