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ASOp CO dec 09

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › ASOp CO dec 09

  • This topic has 2 replies, 3 voices, and was last updated 12 years ago by John Moffat.
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  • November 28, 2012 at 4:14 pm #55879
    Vipin
    Member
    • Topics: 151
    • Replies: 365
    • ☆☆☆☆

    In this question,
    cash flow of financing is discounted at cost of debt and
    cash flow of benefits are discounted at WACC.

    i have seen this only in this question, they are using 2 different discount rates to find NPV.
    why they discount it at cost of debt ?

    November 28, 2012 at 5:29 pm #109125
    acca13
    Member
    • Topics: 57
    • Replies: 172
    • ☆☆☆

    After tax cost of borrowing is used when you purchase or lease an asset,
    but when accepting a proposal of an investment is in question, we use the WACC

    November 28, 2012 at 7:06 pm #109126
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54762
    • ☆☆☆☆☆

    Correct 🙂
    (It is only lease buy questions where this problem appears)

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