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Hi sir
I seem to recall that you previously said that when APV is required then the requirement will state as such
APV was not mentioned anywhere in the requirements for this question but it was expected, according to the solutionSo will we have to use our own judgement in the exam?
Are there any key indicators we could look out for that would direct us to use APV?Many thanks
No – what I said was the usually when APV is required then you are told so (usually by being told to discount as though all equity financed).
Fubuki is one of the few cases where you were not told (it was the current examiners first exam – since then I think I am correct in saying that he has made it clear).
APV is better when there is a significant change in the gearing. If the gearing is not changing (or not changing much) then WACC approach is fine.
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