Dec 2011 Q1-Tramont

As far as I know APV is used to show the financial impact of financing a project through deb or bond (such as the issuing costs, subsidy effect and tax shield from the debt). However, reviewing the solution for this question in the exam kit i have noted that opportunity costs, the $4 per unit contribution from component from Tramont are also included in the APV, while both shall be included in the NPV (in my opinion).

The Cash inflow from continueing the project in the US for the next four years are also included as opportunity cost in the Gamala project NPV/APV. Is that fair to do so? for me it will be more clear if we compare the NPV/APV of continuing in the US or that of moving to Gamala.

Any one to explain for me. Thanks!!!