Using APV, the analysis can be tricky in examples of:

Question

Quizplus · Accepted Answer

All three options (tax subsidy to debt, interest subsidy, and flotation costs) can add complexity to the analysis when using APV. A tax subsidy to debt can change the effective cost of capital, while an interest subsidy can change the cash flows associated with debt payments. Flotation costs, meanwhile, can affect the value of a project at the outset, and must be taken into account when calculating net present value (NPV) or APV. Therefore, the best answer is D, as all three options can make the APV analysis more difficult.

Using APV, the Analysis Can Be Tricky in Examples Of