APV

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December 8, 2016 at 4:01 pm #362305
zulfi245
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When financial gearing is changed we use APV,

but when financial gearing is changed and (say)business risk remains same we can gear the beta assetaccording to new gearing and then calculate ,Be,Ke,Wacc and discount with project specific wacc calculated by this excercise.

so why do we need APV ?
December 9, 2016 at 6:58 am #362512
John Moffat
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APV is better if there is a substantial change in the gearing. Discounting at a project specific WACC would come to the same result, but only if the debt were irredeemable. Given that the debt is more likely to be redeemable then APV is better.
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