sivaram (Asst Mgr-Taxation) (6918 Points)
23 September 2010Answer 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
CA.G.Muguntha Narayanan
(Internal Auditor at TVS Motors)
(2195 Points)
Replied 24 September 2010
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
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