The results indicate that the adjusted present value of the project increases as project risk rises.
The average adjusted present value of the riskless project in Panel B is $751.
The figures are computed by dividing the change in the present value of contributions to the pension fund by the adjusted present value of the project.
The Adjusted Present Value method has been gaining importance in the recent past, not only among theorists, but also for practitioners.
Case 1 refers to a valuation of the step-up induced depreciation benefit in the context of an Adjusted Present Value approach.
Property Investment Analysis Using Adjusted Present Values.
Implicitly, the adjusted present value approach is built on the presumption that it is easier and more precise to compute the valuation impact of debt in absolute terms rather than in proportional terms.
This step of the adjusted present value approach poses the most significant estimation problem, since neither the probability of bankruptcy nor the bankruptcy cost can be estimated directly.
Locke, "Property Investment Analysis Using
Adjusted Present Values," The Appraisal Journal (July 1990): 373-378.
Choosing Between Capital Cash Flows and
Adjusted Present Value Methods
Myers' [22] adjusted present value (APV) method calls for first computing a base-case value under the assumption of 100% equity financing, and then separately adding the present values of any costs and benefits from the actual financing package.
To implement the adjusted present value method, the debt schedule in Exhibit 5 can be used to calculate the schedule of effective debt tax shields, [r.
