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@mariia21 said:
Hi everyone, I have just got the answer from “Ask the tutor” section reg variable loan rate:“It depends what other information there is in the question.
If you are given the current interest rate then you would use that (obviously net of tax relief). If you are not given the current interest rate but there was other debt borrowing, then you would use the cost of the other debt borrowing.
But again, so much depends on what other information there is in the question.”
So then I assume it should have been the cost from the other loan then! It didn’t mention any interest at all, I was trying to find a percentage to hold onto for dear life and found nothing! This would probably only be around a mark if it’s just copying the same % over, so it shouldn’t be too bad!
@demetrios21780 said:
no.for the loan it was variable…..so you just add the value of the loan in the total value of the debt…….Can u remember what was the question for 3 marks in the q3.2?So for the NPV question,
a) Calculate NPV (9 marks)
b) Calculate Payback (2 marks)
c) Discuss acceptance of projects (3 marks)
d) Discuss directors views on project appraisal **I think it was something along these lines I believe I ended up writing pros and cons of both NPV and Payback** (6 marks)For the conservative/aggressive approach, I read that to be moderate you had to cover your fluctuating assets with short term finance and non fluctuating with long term, I compared the two and it looked as though they had more long term finance than short, dependant on the fluctuating assets so I said that this was conservative approach.
Payback I also had 2.74, 2years 9 months.
I feel like most of the multiple choice questions are a blur now.
I think it was to do with when should you not use the same WACC for investment appraisal, I made comments about a different kind of business, or if the funding for the project wasn’t included in the WACC as more debt or equity being raised would change the WACC.