Which of the following statements is FALSE?
A)The APV approach explicitly values the market imperfections and therefore allows managers to measure their contribution to value.
B)We need to know the debt level to compute the APV,but with a constant debt-equity ratio we need to know the project's value to compute the debt level.
C)The WACC method is more complicated than the APV method because we must compute two separate valuations: the unlevered project and the interest tax shield.
D)Implementing the APV approach with a constant debt-equity ratio requires solving for the project's debt and value simultaneously.

Question

Quizplus · Accepted Answer

The statement that the WACC method is more complicated than the APV method because we must compute two separate valuations (the unlevered project and the interest tax shield) is false. In fact, the APV method requires the computation of the unlevered project value, the value of the tax shield, and the present value of financing side effects, which can be more complicated than simply computing the WACC.

Which of the Following Statements Is FALSE