Let Experts Help You with APV and WACC Homework

Students of finance usually have to deal with an enterprise value in their homework and assignments. Adjusted Present Value (APV) and Weighted Average Cost of Capital (WACC) are two of the major enterprise valuation methods. Through our formulaic valuation methods: APV and WACC homework help, we wish to help students understand these two methods of enterprise valuation. Both these methods basically value the firm, but they differ in the way tax shields are treated.

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Adjusted Present Value (APV)

The APV is basically the net present value of a company or a project of solely financed by the present value plus equity of any financing benefits. APV includes tax shields by taking financing benefits into account. We know that forming a basic understanding of the term is important if you are looking for formulaic valuation methods: APV and WACC assignment help. With our help, you will have a detailed understanding of this firm valuation method.

For calculating the adjusted present value or the APV, you firstly need to calculate the NPV or net present value of the company or project without debt. After that, benefits of financing are included by adjusting the NPV. The primary benefits of this method are generally the tax shields that result for single or multiple tax deductions of subsidized loan or interest payments. The most effective situation in which this method should be used is the situation of leveraged buyout.

Weighted Average Cost of Capital

WACC is another method that will be explained to you when you hire formulaic valuation methods: APV and WACC homework help. Weighted average cost of capital or WACC is the calculation of the cost of capital of a firm, in which all the categories of capital are weighted proportionately.

All capital sources, including preferred stock, any long-term debt, bonds and common stock, are included in the calculation of WACC. The WACC of firm increases as the rate of return and beta on equity increases. As an increase in WACC indicates an increase in risk and a decrease in valuation.

In broad terms, the assets of a company are financed either with equity or through debt. The weighted average cost of capital is the average of costs of these financing types. Each of these types is weighted by their proportionate use in a certain situation. With the use of weighted average in this manner, it is possible to determine the amount company owes for the money it finances. All this and more shall be explained to you when you opt for our formulaic valuation methods: APV and WACC assignment help.

APV v/s WACC

The two approaches of enterprise valuation, APV and WACC differ by:

  • In the APV approach, the tax shield is valued separately from un-levered free cash flow
  • In the WACC approach, the tax shield is valued by adjusting cost of capital.

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