question is merely asking us to evaluate on financial grounds.
Usually how do we know whether to calculate simply APV only ? or NPV and APV ?
do we make assumption based on the given information ? if maybe (just assuming), cost of debt isn't given ( and only cost of equity is given ) we just assume the question is asking us to calculate APV ?
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FUBUKI CO (DEC 2010)
7y ago#1APV is better when there is a major change in gearing, and there is in this question. The other clue is mention of debt capacity in the question, because it is only relevant when calculating the APV.
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