Which of the following statements about valuing a firm using the APV approach is most CORRECT A. The value of operations is calculated by discounting the horizon value, the tax shields, and the free cash flows at the cost of equity. B. The value of equity is calculated by discounting the horizon value, the tax shields, and the free cash flows at the cost of equity. C. The APV approach stands for the accounting pre-valuation approach. D. The value of operations is calculated by discounting the horizon value, the tax shields, and the free cash flows before the horizon date at the unlevered cost of equity. E. The value of equity is calculated by discounting the horizon value and the free cash flows at the cost of equity.

D) The value of operations is calculated by discounting the horizon value, the tax shields, and the free cash flows before the horizon date at the unlevered cost of equity.

Explanation:

The adjusted present value method is very similar to the NPV method, but with some "adjustments". It determines the NPV of a project if it was financed solely with equity. Then it includes the tax benefits that could be obtained if the project was financed by debt. The benefits are basically lower taxes due to interest payments that reduce taxable income.

The APV  uses the company's WACC as the discount rate.

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.

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