In page 17 in Ch 1 of the CMP notes, the Core Reading states that simply asking whether the return on a project is greater than the cost of borrowing the funds needed to finance it only shows whether that project will increase value rather maximise shareholder value. I had that in mind when I chose the 8% risk discount rate not the 6% loan rate.
By the way, this is the Sep 2015 exam Q3 (UK)? I agree it was a tricky question and I am about to post a question relating to the depreciation aspect of it! They sure don't make these multiple choice questions straightforward at all!
Last edited by a moderator: Sep 10, 2018