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Chapter 7





                           Adjusted Present Value (APV)





               4.1  When is APV relevant?

                    APV should be used if the gearing ratio of the company changes as a result of
                     the project and its finance.

                    Note: The main reason we cannot use a WACC is that we do not know the final
                     new gearing level – even if we know the finance to be issued, the gearing will
                     be affected by the project NPV (which we are trying to calculate!).

                    APV is particularly recommended when there are complex funding
                     arrangements (e.g. subsidised loans).























































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