In Kaplan Text book Chapter 18 Question 2, in its answer NPV calculation doesn't include interest cost for this project which shows in question 576000 p.a., could you tell me why?
Thanks
Thanks
Ask the Tutor ACCA AFM
Investment Appraisal
16y ago#1I do not have the Kaplan text book.
However normally when you are calculating the NPV of a project you do not include interest cash flows. The reason is that you discount the cash flows at the WACC and this includes the cost of debt.
If you included interest in the cash flows then you would effectively be accounting for the interest twice.
However normally when you are calculating the NPV of a project you do not include interest cash flows. The reason is that you discount the cash flows at the WACC and this includes the cost of debt.
If you included interest in the cash flows then you would effectively be accounting for the interest twice.
Sign in to reply to this topic.