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Sep/Dec 2019 Okan Co – Project Alpha

This topic has 1 reply, 2 voices, and was last updated 2 years ago by John Moffat.

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September 1, 2020 at 4:40 am #582935
Anonymous
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Do we assume the 10% given by the question is the ungeared cost of equity? The question itself doesn’t mention anything for Project Alpha.
September 1, 2020 at 8:40 am #582963
John Moffat
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When using the APV approach, the base case NPV is calculated using the ungeared cost of equity.
The question specifically says that “the cost of capital for appraising the base case NPV of Project Alpha is 10%”.
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