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Sir,
in Chapter 10, example 9, question b)
So we find cost of equity to be 29.6%. Is this the discount rate that should be used to appraise project? If it is, as discussion suggests, what about the cost of debt? are we ignoring it? question says proportion of debt is 0.50 – why are we not calculating cost of debt and automatically assume that dericed cost of equity is the discount rate to be used?
Thank you in advance.
Please ignore this question. Got the answer from the lecture. Let me just point out that answer in the back of notes is wrong specifically for part b) as 0.5 gearing is used and not 50/50… the answer is also incomplete as I do not see any WACC workings there aswell.
Thanks – I will look at the answer in the notes and correct it if needed.
However I am not so worried, because the notes make it so clear that they should only be used along with the lectures. Those who are not watching the lectures for any reason must buy a Study Text from one of the ACCA approved publishers and study from there – the lecture notes are only lecture notes 🙂
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