Page 9 - PowerPoint Presentation

THE FINANCING DECISION

Determining the most cost-effective

form of finance

• the net present cost in South African rand of the

associated finance-related cash flows (including the

implications of taxation), using an appropriate risk-

adjusted discount rate; and/or

• the internal rate of return per annum of the associated
finance-related cash flows (including the implications of

taxation), taking cognisance of different exchange rates

• This process is fairly simple when comparing, for

example, different loan options denominated in

rand.

• However, foreign debt finance introduces further

complications, including: changes in exchange

rates, foreign exchange risk and country risk.

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