The APV Method Includes the NPV of a Project Assuming

question 65

Multiple Choice

The APV method includes the NPV of a project assuming all-equity financing and then adds in the NPV of financing effects. The financing effects are

• A)tax subsidy of dividends, cost of issuing new securities, subsidies of financial distress, and cost of debt financing.
• B)cost of issuing new securities, cost of financial distress, tax subsidy of debt, and other subsidies.
• C)cost of issuing new securities, cost of financial distress, tax subsidy of dividends, and cost of debt financing.
• D)subsidies of financial distress, tax subsidy of debt, cost of other debt financing, and cost of issuing new securities.

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Definitions:

U.S. Dollar

The official currency of the United States, often used as the global standard for financial transactions.

Higher Inflation

A situation where the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling, is greater than what is deemed normal or acceptable.

Canadian Dollar

The official currency of Canada, often symbolized as CAD or simply $ when discussing Canadian funds.

U.S. Dollar

The recognized money of the United States, extensively utilized as a standard and reserve currency globally.