MoneyForNothing.com is a company producing smartphone apps. It finances its operations with D$/$E ratio of $0\mathrm{.}2$ and plans to continue doing so forever. The beta of its assets is $1\mathrm{.}54$ and the beta of its debt is $0\mathrm{.}7.$ The company is now preparing for an IPO. The company$$s CFO has prepared the valuation using the WACC method and found that the enterprise value of MoneyForNothing.com is $$15$ billion. The investment bankers that the CEO is looking to hire believe that the Adjusted Present Value $($APV$)$ is a better method to value the firm and that using that method will help arrive at a higher valuation. Are the banker$$s right?

MoneyForNothing.com is a company producing smartphone apps. It finances its operations with D$/$E ratio of $0\mathrm{.}2$ and plans to continue doing so forever. The beta of its assets is $1\mathrm{.}54$ and the beta of its debt is $0\mathrm{.}7.$ The company is now preparing for an IPO. The company$$s CFO has prepared the valuation using the WACC method and found that the enterprise value of MoneyForNothing.com is $$15$ billion. The investment bankers that the CEO is looking to hire believe that the Adjusted Present Value $($APV$)$ is a better method to value the firm and that using that method will help arrive at a higher valuation. Are the banker$$s right?

No$,$ they are not

Yes, they are