SFM Leasing Practice manual
in q 11 and 23 though cost of capital is given, but still institute has taken (loan interest rate-tax rate) for discounting purpose
this approach has been adopted in q15 as well but there it may b bcoz the question has not specified any cost of capital
so what shd b the basis of decision?? plz help
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SFM Leasing Practice manual
Replies (3)
As per my understanding since source of fund is debt the int rate thereon is used for discounting.Cost of capital may be given as an addl info or to just to confuse us.
in that case in the earlier questions though they had given both cost of capital and loan rate, they had taken always the cost of capital. the loan interest rate was used merely to calculate instalment amount.
you are entitled to use after tax cost of capital. just mention that by way of a note.
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