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Hi Sir John Moffat! Thank you for all your helpful lectures, I am quite confused with regards to example 2 in Chapter 12. I know that the 5% interest rate is just an assumption for us to calculate the interest benefit but what I don’t understand is why we use 5% as you say the interest rate in discounting the benefit into their present value? We should be discounting them in cost of debt right? and not in interest rate which is also the coupon rate, or is it also an assumption that the cost of debt is 5% as the problem did not state any cost of debt?
Oh Sir Moffat, disregard my question. I haven’t finish the lecture before asking. I got confused and impulsively ask this question without even finishing the lecture, my bad.
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