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when we calculate cost of capital/debt/WACC etc. it usually comes as a decimal figure on the capital.
are we required to round it off to the nearest digit for exams or just use the calculated decimal figure?
If you have to calculate the WACC then best is to leave it to 2 decimal places. However if you are then required to use the WACC to discount a project then round to the nearest % and use the tables, as I explain in my free lectures.
is it necessary to use the tables? can i use my normal calculator to dicount figures?
lets say discounting 400 from year 4 and cost of capital is 10%
calculator saying 273.20
is this correct?
Use your calculator if you want. But watch for three things:
– your calculator must not be able to display text (or it will not be allowed in the exam)
– the marks in the exam are for the workings rather than for the final answer. So if you just make one error and all you have written down is the final answer you will get 0 for that part. If your workings are there and it is clear what you are doing, then you will still get most of the marks even if you make a silly mistake
– make sure you know how to get your calculator to discount things like an annuity starting in 5 years time.
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