Question

If the net present value of a project is −$10,000, and the net present value of...

If the net present value of a project is −$10,000, and the net present value of leasing for the project is +$12,000, calculate the APV (adjusted present value) of the project.
Group of answer choices

($10,000)

($2,000)

$2,000

$12,000
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Homework Answers

Answer #1

Adjusted present value a variant of DCF, is value of the target company if it were entirely fiananced by equity plus the value of the impact of debt financing in terms of the tax benefits as well as bankruptcy cost.

or

APV is the total of present value of (1) cash flows after taxes, (2) interest tax shields and (3) any concession/subsidies on interest cost.

Adjusted Present value = Net present value of a project + net present value of financing/leasing benefits

= -10000 + 12000

= 2000

so the option (C) should be correct.

Please check with your answer and let me know.

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