8:50 - can someone explain why haven't we taken 8% as the relevant cost of capital? as the WACC is given as 7%, the relevant cost of capital should be greater than that right? ( as it is mentioned that if IRR>WACC you go for it)
Cost of capital and WACC are always equal. So WACC is always going to be the discounting rate used to find the PV of the project cash flows are it is construed that 7% is the rate at which funds have been raised to finance the project. Do not hesitate to leave a comment in case you are not convinced yet.
with current capital structure, WACC represents the best estimate of the cost of capital for the “average” risk project of the company. IFT support team
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8:50 - can someone explain why haven't we taken 8% as the relevant cost of capital? as the WACC is given as 7%, the relevant cost of capital should be greater than that right? ( as it is mentioned that if IRR>WACC you go for it)
Cost of capital and WACC are always equal. So WACC is always going to be the discounting rate used to find the PV of the project cash flows are it is construed that 7% is the rate at which funds have been raised to finance the project.
Do not hesitate to leave a comment in case you are not convinced yet.
with current capital structure, WACC represents the best estimate of the cost of capital for the “average” risk project of the company.
IFT support team
Target capital structure is based on book value or market value
Where is the curriculum?
I wanna solve Eg 2 of WACC