Hi everyone. Can someone please explain me whether we include interest expense as a relevant cash flow when appraising NPV because the suggested answers dont include it although they are appraising at WACC. Thanks.
ACCA Forums
FMInterest expense in DCF
11y ago#1You never include interest payments.
The WACC includes the cost of any debt borrowing and therefore the interest is being dealt with by the discounting - that is why we discount. To subtract the interest payments would mean you were effectively dealing with the interest twice.
I really do suggest that you watch the free lectures on investment appraisal.
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