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Lecture7 - when to use APV

Howeverapvisaversatileandreliablemethod

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Unformatted text preview: Currently, WACC is the most common DCF valuation method used by practitioners. However, APV is a versatile and reliable method that will soon replace it. APV always works when WACC does, and sometimes when WACC doesn’t, because it requires fewer restrictive assumptions (e.g., constant capital structure). APV allows managers to identify the sources of value in a project, and not only how much it is worth. APV requires more calculations than WACC, but this is not a problem since Excel will easily do it for you. 3 When to Use APV – General Idea WACC, APV, and FTE are equivalent i...
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