APV

This topic has 1 reply, 2 voices, and was last updated 9 years ago by John Moffat.

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April 26, 2016 at 10:13 am #312712
zee
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Dear Sir
When calculating the finance package of APV what is the rate we must use to discount the tax savings from debt? Is it the pre tax cost of debt or risk free rate??
May 24, 2016 at 7:54 am #316759
John Moffat
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In theory the two will be the same.
In practice, the two are different and the examiner allows you to use either (even though the final answer will obviously be different).
I do make this clear in the free lectures on APV 🙂
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