题目
题目

Corporate Finance (WI000091) (11.08.2025) Lecture Hall Exam

单项选择题

One valuation method is the Adjusted Present Value (APV) method. Which statement regarding the APV method is most likely wrong?

选项
A.A. Assuming a constant debt level, the tax shield has the same risk as debt
B.B. The APV method splits the entity value of a debt financed firm into the value of a unlevered firm and the present value of the tax shield
C.C. The APV method is appropriate if the amount of debt is not constant over time.
D.D. The tax shield is considered in the unlevered cash flows.
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标准答案
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思路分析
The question asks which statement about the Adjusted Present Value (APV) method is most likely wrong, so we will examine each option to assess its accuracy. Option A: 'Assuming a constant debt level, the tax shield has the same risk as debt.' This aligns with the APV framework in which the tax shield is often treated as a separate cash flow whose risk mirrors the risk of the financing generating that......Login to view full explanation

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The Mars project will generate a free cash flow of $110 per year forever starting in Year 1 and its unlevered cost of capital is 20%. The project costs $400 and it will be financed entirely with a loan with the following fixed schedule: borrow $400 today, pay annual interest on the principal at a 10% rate in Year 1 and Year 2, and repay the principal at the end of Year 2. The tax rate is 40%. The project’s NPV estimated using the APV method (with one decimal) is:

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One valuation method is the Adjusted Present Value (APV) method. Which statement regarding the APV method is most likely wrong?

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