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16 March, 21:21

Define APV. How does it differ from NPV? Identify and discuss at least two other business valuation models that are popular.

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  1. 16 March, 22:29
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    Adjusted Present Value (APV) and Net Present Value (NPV) are tools used in valuation of business operations or business projects. APV differs from NPV as the former uses cost of equity as the discount rate whereas the latter uses the WACC (weighted average cost of capital). Other business valuation methods are Payback period which is used to determine the number of years it takes for a project's future cashflows to fully recover the initial amount invested. Another example is Internal Rate of Return (IRR) which is the rate that determines how attractive a project; that which makes the NPV equal to zero.
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