APV discount rate

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September 29, 2017 at 12:55 pm #408986
iosif
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Hello i would like to ask when in an APV calculation we use the ungeared cost of capital to discount the cash flows ( cost of equity calculated using asset beta) and when we use the regeared cost of capital ( cost of equity callculated using regeared equity beta)
Thx a lot !
September 30, 2017 at 10:42 am #409058
John Moffat
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In APV we always discount at the ungeared cost of equity when calculating the base case NPV (i.e. the cost of equity calculated using the asset beta for the project).

This is always the case.
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