In the adjusted present value method,the levered cost of equity is used for discounting cash flows during the period in which the capital structure is changing and the weighted-average cost of capital for discounting during the terminal period.

Question

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The adjusted present value method uses the unlevered cost of equity to discount cash flows and separately accounts for the value of tax shields, not the levered cost of equity or WACC.

In the Adjusted Present Value Method,the Levered Cost of Equity