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  • Adjusted Present Value Template

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    This document provides an example of calculating a project's adjusted present value (APV). It shows the steps of first determining the value of the unlevered project, then calculating the present value of debt financing, and finally finding the APV by adding those two values. The example unlevered project has a value of $2,249 based on its forecasted annual free cash flows. Factoring in $10,000 in debt at a 7% interest rate and 25% tax rate gives a net debt value of $1,911. The overall APV is then the sum of these, which in this case is $4,159.

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    This document provides an example of calculating a project's adjusted present value (APV). It shows the steps of first determining the value of the unlevered project, then calculating the present value of debt financing, and finally finding the APV by adding those two values. The example unlevered project has a value of $2,249 based on its forecasted annual free cash flows. Factoring in $10,000 in debt at a 7% interest rate and 25% tax rate gives a net debt value of $1,911. The overall APV is then the sum of these, which in this case is $4,159.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    4 views1 page

    Adjusted Present Value Template

    Uploaded by

    Hsn ali
    This document provides an example of calculating a project's adjusted present value (APV). It shows the steps of first determining the value of the unlevered project, then calculating the present value of debt financing, and finally finding the APV by adding those two values. The example unlevered project has a value of $2,249 based on its forecasted annual free cash flows. Factoring in $10,000 in debt at a 7% interest rate and 25% tax rate gives a net debt value of $1,911. The overall APV is then the sum of these, which in this case is $4,159.

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    © All Rights Reserved
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    © Corporate Finance Institute®. All rights reserved.

    Adjusted Present Value Example

    Step 1: Calculate the value of unlevered project (VU)


    Year 0 1 2 3 4 5
    FCF ($50,000) $16,000 $16,000 $16,000 $16,000 $8,000

    Unlevered cost of capital 12.5%


    Value of unlevered project $2,249

    Step 2: Calculate the net value of debt financing (PVF)


    Debt amount $10,000
    Cost of debt 7%
    Interest rate 5%
    Tax rate 25%
    PV of debt financing $1,911

    Step 3: Find the adjusted present value of the project (APV)


    Adjusted present value of projec $4,159

    This file is for educational purposes only. E&OE

    Corporate Finance Institute®


    https://corporatefinanceinstitute.com/

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