[Jemmily]

Assume that theloan notes have recently been issued specifically to fund the
considered. It has been suggested at a project appraisal meeting that because
company’s expansion programme under which a number of projects are being
these projects are to be financed by the loan notes,the cutoff rate for project
acceptance should be the after-tax interest rate on the loan notes rather than the
WACC. Discuss this suggestion

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