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WAAC

This topic has 2 replies, 3 voices, and was last updated 13 years ago by John Moffat.

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June 7, 2011 at 4:49 pm #49014
ousjallow
Member
- Topics: 1
- Replies: 9
I WAS TRYING TO TREAT F9 MOCK FROM OPEN TUITION QUESTION ONE THAT ASKED FOR WACC. MY QUESTION WAS I GOT IT WRONG BECAUSE I USED 100 but according to the solutions,Redemption premium 10% was used . I did not see any were in the question say about the premium. Can someone help me as to why the 10 % premium was used?
September 7, 2011 at 10:02 pm #83587
osuja
Participant
- Topics: 1
- Replies: 8
Hi prof,
My question is on when calculating for cost of debt redeemable .
if i decides to use DCF 5% and 10% to calculate for the NPV , deriving the IRR lets say 8.672% and the textbook decides to use DCF of 10% and 20% deriving a result of 8.333%
Hence my question then is does it make any difference or will the answer be acceptable by the examiner ?
pls help cos am confused.
November 6, 2011 at 4:02 pm #83588
John Moffat
Keymaster
- Topics: 57
- Replies: 54674
Using two different rates will give a slightly different IRR, but will still get full marks.
(The reason is that the relationship between the rate of interest and the NPV is not linear).
Just make sure your workings are clear – you will still get the marks.
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