The APV Method Is Comprised of the All Equity NPV

question 20

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 the above.

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Definitions:

Net Cash Flow

The difference between a company's cash inflows and outflows in a given period.

Tax Rate

The percentage at which income or financial transactions are taxed by a government.

Cash Inflows

Money received by a business from its various activities, like sale of goods, services, or obtaining a loan.

Cash Outflows

The movement of money out of a business as expenditures, payments, or investments, which reduce the company's cash balance.