Chapter 7

Question 1

Taking on a new project - which method do you use when? (WACC)

Answer 1

Project business risk and impact of project finance -

Same as company and constant gearing - use existing WACC

Same as company and change in gearing - use adjusted present value

Different from company and constant gearing - calculate a project- specific risk-adjusted WACC

Different from company and change in gearing - use adjusted present value