Adjusted net present value is developed using the following steps: first,discount the cash flows of the all-equity firm,second,add the value of the financial side effects,and,third,

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Adjusted net present value (ANPV) is used to incorporate the potential financial side effects of a project, such as the impact on the company's tax shield and cost of capital. To calculate ANPV, the cash flows of the all-equity firm are first discounted, and then the value of the financial side effects is added. The third step is to add the value of any growth options that arise during the project. This accounts for the potential future benefits the project may hold beyond its initial cash flows. Therefore, the best choice is to add the value of any growth options that arise during the project (B). Choices A, C, and D do not apply to the ANPV calculation.

Adjusted Net Present Value Is Developed Using the Following Steps