The APV method is more complicated than the WACC method because we must compute two separate valuations: ________.
A) the unlevered project and the income tax shield
B) the unlevered project and the CCA tax shield
C) the levered project and the interest tax shield
D) the unlevered project and the interest tax shield

Question

Quizplus · Accepted Answer

The APV (Adjusted Present Value) method requires computing the value of the unlevered project (as if it were entirely equity-financed) and separately calculating the value of the interest tax shield (benefits from debt financing). This makes it more complex than the WACC (Weighted Average Cost of Capital) method, which integrates the effects of debt and equity financing into a single discount rate.

The APV Method Is More Complicated Than the WACC Method