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Ask the Tutor ACCA FM

DISCOUNT RATE TO USE

RRaj3y ago
Hello Sir Thank you for your videos, they have been the most helpful to me to help me prepare for my F9 Financial Management attempt on 9th December. One area which confuses me a lot is which discount rate to use i.e the before tax or after tax discount rate. I hope you can clarify this doubt as it would help me a lot for my upcoming exam. Thank you
John MoffatJohn MoffatTutor3y ago#1
Assuming that you are referring to investment appraisal, then we always discount at the cost of capital to the company. The cost of capital is always calculated after tax, as explained in my lectures on the calculation of the cost of capital.
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