Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 18, Problem 1CQ
APV How is the APV of a project calculated?
Expert Solution & Answer
Summary Introduction
To determine: Adjusted present value and how it is calculated.
Introduction:
Adjusted present value is known as NPV (net present value) of a company or project. By considering financial benefits, adjusted present value tax shield such as deductible interest.
Explanation of Solution
The following are the ways by which adjusted present value:
Adjusted present value is equivalent to the NPV of the project that is the project worth for an unlevered company added to the net present value of financing side-effects.
Formula for calculating adjusted present value:
The adjusted present value is computed by adding the base value of net present value with the NPV of all financial side effects.
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