The MFC Corporation needs to raise $200 million for its mega project. The NPV of the project using all-equity financing is $40 million. If the cost of raising funds for the project is $20 million, what is the APV of the project?

Question

Quizplus · Accepted Answer

The Adjusted Present Value (APV) of the project is calculated by adding the Net Present Value (NPV) of the project using all-equity financing to the present value of the financing effects. Here, the NPV is $40 million, and the cost of raising funds is $20 million, which is a negative effect on the project's value. Therefore, the APV = $40 million - $20 million = $20 million.

The MFC Corporation Needs to Raise $200 Million for Its