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%
