Final answer:
The appropriate cash-flows to discount in valuing a project finance are a. NOCF - Debt Service (principal repayment + interest payment).
Step-by-step explanation:
In valuing a project finance, the appropriate cash-flows to discount are NOCF - Debt Service (principal repayment + interest payment). The Net Operating Cash Flow (NOCF) represents the cash inflows generated by the project, while the Debt Service represents the cash outflows for repaying the principal amount and the interest payments.
By discounting these cash flows, we are determining the present value of the future cash flows. This helps in assessing the profitability and feasibility of the project. The appropriate interest rate to discount the cash flows depends on factors such as the risk associated with the project and the prevailing market interest rates.
Example:
- If the NOCF is $1,000 and the Debt Service is $500, the appropriate cash flows to discount would be $1,000 - $500 = $500.