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Does NPV include corporate debt?

Does NPV include corporate debt?

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Expert Solution

The Answer is Yes

Net present value is a technique of capital budgeting, it is used to measure the net amount the project is going to be added if the company chooses a certain project. It is calculate by Discounting all the cash flows that the project is going to generate and subtracted by the initial investment.

The Discount rate used is the Weighted average cost of capital of the firm, Which includes the cost of the debt and the cost of equity, these are the cost that the company actually pays to finance the capital. Thus, It is true that the Net present value takes the corporate debt into account.

jeff jeffy answered 2 years ago
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