When you calculate NPV you have to decide on a discount rate or a hurdle rate. Normally, you would take into account the cost of borrowing in the discount rate. If you don't want to consider the cost of financing, you can subtract that cost from your discount rate.
Example:
Financing cost 7%
Expected profit 5%
Discount rate 12%
New discount rate w/o financing 5%
Nov 20, 2009
Calculate NPV Without Financing by: Dee Reavis
When you calculate NPV you have to decide on a discount rate or a hurdle rate. Normally, you would take into account the cost of borrowing in the discount rate. If you don't want to consider the cost of financing, you can subtract that cost from your discount rate.
