Answer to a problem is now given ON CASH FLOW FROM VARIOUS ANGLES
28% IS THE EQUITY IRR
18.42% IS THE PROJECT (LENDERS) IRR
a QUESTION IS ASKED THAT IF WACC IS 16% AND COST OF EQUITY IS 24% SHOULD THE PROJECT BE ACCEPTED ?
Can any one explain this please
Dear Sivaram,
The question can be answered only if the cost of debt is given. But, roughly, the WACC is 16% and yield is 18.43 %.Hence, in any case the project would give an yield of 2.43%. But for givng precise answers, the cost of debt and amount of debt should be known
cost of debt is15%
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