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Adjusted Present Value

Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › Adjusted Present Value

  • This topic has 1 reply, 2 voices, and was last updated 10 years ago by John Moffat.
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    Posts
  • February 1, 2015 at 2:16 pm #224637
    sehrish
    Member
    • Topics: 13
    • Replies: 29
    • ☆

    Hi
    when we calculate the side effects of financing for Adjusted Present Value Technique what discount rate should we use? In BBP exam kit, In some questions they have used Rf (Risk free rate of return) while in others they have Cost of debt as Discount rate
    If the following date is given what discount rate should be used and what will be the Present value of tax saving on Interest?
    Please explain If there is any criteria to choose the discount rate

    Long Term Loan $80m with 3 years life
    Pre-tax Cost of debt is 8%
    Risk free rate is 5%
    Tax is 30%

    February 1, 2015 at 2:35 pm #224653
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54680
    • ☆☆☆☆☆

    I have answered your post in the Ask the Tutor Forum 🙂

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