The justification for the adjusted present value (APV)method reflects the theoretical notion that firm value should not be affected by the way in which it is financed.However,recent studies empirical suggest that for LBOs,the availability and cost of financing does indeed impact financing and investment decisions.

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Though the APV method assumes that firm value is unaffected by the way it is financed, empirical studies suggest that for LBOs, financing availability and cost do impact financing and investment decisions.

The Justification for the Adjusted Present Value (APV)method Reflects the Theoretical