The APV formula can be written as: UCF 1 1 0 t t t ( R )
Question:
The APV formula can be written as:
UCF 1 1 0 t
t t ( R )
Σ
Additional effects of debt Initial investment There are four additional effects of debt:
• Tax shield from debt financing.
• Flotation costs.
• Bankruptcy costs.
• Benefit of non–market-rate financing. LO.1
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