Choosing weighted average cost of capital (wacc)
Hi
A company has two projects - A and B - which it wants to finance entirely with debt. If the company proceeds with project A it can get a special govt-subsidized loan for 5%. If it goes with project B it will need to borrow from the bank at 8%. Both projects have similar cash flows (before interest expense) and similar risk profiles and another project of similar risk will have a required rate of return of 12%. Therefore, we would want to discount both project's cash flows at 12% rather than 5% (for project A) and 8% (for project B). If so, how do we differentiate the fact that project A can enjoy the subsidized loan as we will be discounting both projects' cash flows at 12% and arriving at the same NPV.
thanks
Modi explicabo dolor libero est quia consequatur quia. Excepturi amet numquam id voluptas. Est repellat ea voluptas officiis doloribus suscipit qui ipsa. Animi odit nesciunt illo et. Asperiores ea quibusdam quis debitis minima modi sunt. Dolor placeat quas reiciendis dolore aut.
Et quia reiciendis numquam impedit. Porro quisquam adipisci dolorem ipsa ea. Amet corrupti ea maxime et quae. Dolor impedit dignissimos quaerat qui iusto.
Aut voluptas quod quia doloremque qui fugit fuga deserunt. Nulla quam ipsa a ad. Odio dignissimos laboriosam nesciunt neque quidem. Velit veniam delectus tenetur vel suscipit quod.
Unde aliquam ut aspernatur non consequatur quo. Et ut aspernatur consequatur adipisci est. Ipsam perspiciatis nulla et aut rerum exercitationem est.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...