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Hi sir,
I find some qstn in cost of capital related to debt which is redeemable debt so my question is that when we have to find post cost of debt or pre tax of debt and when we have to find IRR I see many questions they assume DF like eg 5%,10%, 15% . So whenever in question I have to find IRR I have to assume ? And whichever I use DF my answer will be same?? Can you please suggest me what should I do regarding to this type of questions.
Thanks
You are obviously not watching my free lectures and you cannot expect me to type out all of my lectures here!!
Whenever calculating the IRR (whether for project appraisal or for calculating the cost of debt), you can use any two ‘guesses’ (unless obviously the question tells you which rates to use for your guesses).
Different guesses will not give exactly the same answer, because the relationship is not linear. However the difference will not be great and is irrelevant in the exam – you still get the marks.
I explain all of this in my lectures. The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
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