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sir i dont quite understand that what the discount rate that is used in npv caculation is basically? is it an interest rate specific to the project or general interest rate of economy or is the discount rate basically WACC , sorry for asking such silly questions
In Paper F9, we usually use the WACC on the assumption that the level of gearing and the level of business risk remain unchanged.
However you can be asked to calculate a project specific rate, which is relevant when the beta of the project differs from the current beta of the company.
All of this is explained (with examples) in my free lectures.
(the lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well)
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