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Dear Sir
I lack understanding on the interest payment in the NPV study. I know it is not included as an expense, however, you still have to pay back the loan. Is the fact that you discount the cashflow every year mean you are taking into account paying your debt repayment and dividend?? Or after all is said and done must i deduct (separately on another piece of paper) the debt repayment and the dividend???
We never show interest payments or dividends in the calculation of the net cash flow each year.
Discounting at the WACC is accounting for the cost of finance, and it would be double-counting if we were to include interest payments in the cash flows.
I think I understand, the debt itself is like a bond or long term loan note so just the interest is paid every year
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