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Regarding Wacc

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Regarding Wacc

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • July 10, 2022 at 12:12 pm #660238
    dennissherpa101
    Member
    • Topics: 58
    • Replies: 60
    • ☆☆

    sir one of the assumption for wacc is that it should not be project specific does that mean the finance was raised solely for that project? or is it something else can you describe it please thanks

    July 10, 2022 at 4:03 pm #660244
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 53348
    • ☆☆☆☆☆

    I do not state that as an assumption, so I don’t know where you read it.

    It is not an assumption of the WACC.

    An assumption when we use the WACC to appraise is that it is not going to change due to the new project (i.e. is not project specific).

    July 11, 2022 at 4:46 am #660269
    dennissherpa101
    Member
    • Topics: 58
    • Replies: 60
    • ☆☆

    It says the finance is not project specific.
    sir can you also explain this line it is therefore not the marginal cost of the additional finance but the overall average cost of all finance raised that is required for project appraisal.

    July 11, 2022 at 9:21 am #660275
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 53348
    • ☆☆☆☆☆

    It is stating (as I wrote before) that in Paper FM we assume that the WACC will remain as it is now and will not change due to doing the new project.

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