Which of the following are guidelines for the three methods of capital budgeting with leverage?

Question

Quizplus · Accepted Answer

Choosing between APV and FTE/WACC for capital budgeting with leverage depends on whether the project's level of debt is known or unknown over the life of the project, as well as whether the firm's target debt-to-value ratio applies to the project over its life. If the project's level of debt is known or if the firm's target debt-to-value ratio applies to the project, then use APV. If the project's level of debt is unknown but the firm's target debt-to-value ratio applies to the project, then use FTE or WACC. Therefore, option D is the correct answer as it covers both scenarios.

Which of the Following Are Guidelines for the Three Methods