Hello
If business risk of company changes as a result of an investment project, then using the WACC of a company in investment appraisal is not appropriate, and a project-specific discount rate should be calculate in such a case. Right?
However, if financial risk of company changes as a result of an investment project, then using the WACC of a company in investment appraisal is not appropriate and in this case project-specific discount rate should be calculated OR marginal cost of capital should be calculated?
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WACC and marginal cost of capital
7y ago#1First paragraph - right.
Second paragraph - we would calculate what is called an 'adjusted present value', but this is not examinable in Paper FM (only in Paper AFM).
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