The Adjusted Present Value Calculator (APV Calculator) allows you to calculate the APV based on Net Present Value (NPV) or investment adjusted for the interest and tax advantages of leveraging debt provided that equity is the only source of financing
|The Present Value of Cash Flows ( pvcf ) is|
|The Present Value of Tax Shield ( pvts ) is|
|The Adjusted Present Value ( apv ) is|
|Present Value of Cash Flows formula and calculations|
|pvcf = cf/(r + a) × (mr - r)/100 - pc|
/( + ) × ( - )/100 -
/ × /100 -
|Present Value of Tax Shield formula and calculations|
|pvts = e × t/cod|
pvts = × %/%
pvts = × /
pvts = ×
|Adjusted Present Value formula and calculations|
|apv = pvcf + pvts|
apv = +
|Calculator Input Values|
|Project Cost (pc)|
|Cash Flow (cf)|
|Interest Expense (e)|
|Risk Rate (r) %|
|Asset Beta (a)|
|Market Return (mr) %|
|Cost of Debt (cod) %|
|Tax Rate (t) %|
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A company can finance a project/investment using only shareholder equity without leverage/borrowed, cash flows. This provides unleveraged cash flow from shareholder equity
The company then repays associated debts using the unleveraged cash flow from shareholder equity.
This benefits the company by leveraging tax deductions on the interest part of these payments.
This helps to increase the project/investment bottom line which in turn puts the company at an advantage as far as the project/investment profitability.
The company can analyse the project/investment profitability using the adjusted present value (APV) including adjusting tax benefits from interest obligations on associated outstanding debts and subsequently comparing these against the return on alternate cash flows for funding the project/investment.
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