Adjusted Present Value

This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.

Viewing 2 posts - 1 through 2 (of 2 total)

Author
Posts
August 18, 2021 at 11:50 pm #631996
Edinaeval
Participant
- Topics: 1
- Replies: 1
Hello Sir
Please, when computing APV, is it an option for the firm to use 100% subsidized/cheap loan? If yes, would the tax savings then be discounted using the cheap loan rate or Kd?
Also, I will like to know at what point the risk free rate of return is used to discount
August 19, 2021 at 8:00 am #632022
John Moffat
Keymaster
- Topics: 57
- Replies: 54835
As I do explain in my lectures on this, there are arguments for discounting the tax saving at the applicable loan rate or at the risk free rate, and discounting at either rate gets full marks in the exam.
Author
Posts

Viewing 2 posts - 1 through 2 (of 2 total)

You must be logged in to reply to this topic.