When Using the Adjusted Present Value (APV)valuation Method You Should

question 59

Multiple Choice

When using the adjusted present value (APV) valuation method you should

• A)discount expected after-tax cash flows as if 100% equity-financed at the firm's overall cost of capital and add the present value of the interest tax subsidy, using the firm's overall cost
• Of capital as the discount rate.
• B)discount the expected after-tax cash flows, based on the firm's expected capital structure, at the firm's overall cost of capital and subtract the present value of the interest tax
• Subsidy, using the firm's overall cost of capital as the discount rate.
• C)discount expected after-tax cash flows as if 100% equity-financed using the firm's WACC and add the present value of the interest tax subsidy, using the firm's cost of debt capital as
• The discount rate.
• D)discount expected before-tax cash flows as if 100% equity-financed at the cost of equity for the firm and add the present value of the interest tax subsidy, using the firm's cost of debt
• As the discount rate.

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