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Sir,
In NPV questions there are often multiple cost of capital like:
WAAC,After tax kd,Before tax kd
How to decide which to incorporate??Does it depend on situation.?
Like if we are using Debt for investment then kd else WAAC ?
Also what should be preferred in KD
Pre tax or post tax..Sorry if you have already explained this in your lectures.I cannot recollect the concept neither the lecture name.
We always discount at the WACC regardless of how the project is financed.
The WACC is always calculated after tax.This is covered in the chapter called “The cost of capital” and the lectures working through that chapter.
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