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Adjusted Present Value

This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.

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August 18, 2021 at 11:50 pm #631996
Edinaeval
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Hello Sir
Please, when computing APV, is it an option for the firm to use 100% subsidized/cheap loan? If yes, would the tax savings then be discounted using the cheap loan rate or Kd?
Also, I will like to know at what point the risk free rate of return is used to discount
August 19, 2021 at 8:00 am #632022
John Moffat
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- Topics: 57
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As I do explain in my lectures on this, there are arguments for discounting the tax saving at the applicable loan rate or at the risk free rate, and discounting at either rate gets full marks in the exam.
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