07 October 2013
Now for allotting the shares for Foreign Direct Investments, we are asked to calculate future projections and to discount at appropriate P.V. factors. Now my question is how to determine the NPV factor, say 10%, 11% and let me know what is the basis upon which this discounting factor is to be decided upon
07 October 2013
PRACTICALLY i am explaining how it is done, If your project involves loan from financial instituation, then take that interest rate only, if no then you can take any rate over and above risk free rate (i.e. adding premium) which is generally 8% (bank FD rate). Generally first companies already decide what Share Value they want and then they calculate and decide rate accordingly..remember higher the rate you take, lower the share value will come..practically i have seen CAs/ companies taking rate upto 20%.
CAclubindia
