Describe adjusted present value method?

Question

30 Oct 2021

Answer :

Word Count : 672

Adjusted Present Value (APV) is similar to NPV. The difference is that is uses the cost of equity as the discount rate (rather than WACC). Separate adjustments are made for the effects financing (e.g., the tax advantages of debt). As usual with DCF models of this sort, the calculation of adjusted present value is straightforward but tedious.

The first step in calculating an APV is to calculate a base NPV using the cost of equity as the discount rate. This may be the same as the company’s cost of equity. In some cases it may be necessary to recalculate it by estimating a beta and using CAPM This is most likely when assessing ________ ____ _____ ___ _______ _______ __________ _______ __________ ____ ___.
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