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Hi John,
In all of the questions I have seen so far, the debt capacity is always assumed to be equal to the total debt finance required. I wonder what will happen if debt capacity is lower than total debt finance required? Lets say an APV question that we finance the project entirely with 100m debt. However the debt capacity of the company is only 80m. In this case, what will happen to the Investment at Y0 in our Base case NPV calculation, and then to the effects of the debt later on?
Thank you.
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