The APV Method Is Comprised of the All Equity NPV

question 27

Multiple Choice

The APV method is comprised of the all equity NPV of a project and the NPV of financing effects. The four side effects are:

• A) tax subsidy of dividends, cost of issuing new securities, subsidy 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 to debt financing.
• C) cost of issuing new securities, cost of financial distress, tax subsidy of dividends and cost of debt financing.
• D) subsidy of financial distress, tax subsidy of debt, cost of other debt financing and cost of issuing new securities.
• E) None of these.

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Definitions:

Semi-Annually

Occurring twice a year; a term often used in the context of paying interest or dividends.

Yield To Maturity

The total return anticipated on a bond if it is held until its maturity date, considering all interest payments and the principal repayment.

Par

The face value of a bond or other security, at which it can be redeemed at maturity or the amount of money equal in value to a particular share or bond.

Coupon

The yearly payment of interest to those holding bonds, represented as a percentage of the bond's nominal value.