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Hi there,
I’m a bit confused on how they calculated the cost of debt. Should k(d) not be equal to the risk free rare plus credit risk premium I don’t understand where the 0.9 in the answer came from to get to a k(d) of 4.9.
Many thanks!
But which same question? This thread has questions about both Tisa and about Coeden.
I’m so sorry, in the question Tisa co, how do we find PVr for the purpose of MIRR calculation?
It is the PV of the return phase, so the PV of the inflows from years 1 to 4.
Hello Sir,
For discounting in Fabuki co., we have calculated the ungeared cost of equity as it is the measure of business risk for entering in a new business. Whereas in Tisa co., we calculate the WACC. I am really confused.
When do we use cost of equity to discount and when is it WACC?
Thank you in advance.Fubuki is using an APV approach and with APV we always calculate the base case PV using the ungeared cost of equity (it is nothing to do with entering a new business).
In Tisa we are not using an APV approach (the question specifically asks for the cost of capital).
I do suggest that you work through my free lecture notes and the free lectures that go with them.
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