Question

A project will be financed with a mix of equity and a

Q: Answer-A project will be financed with a mix of equity and a concessional government loan carrying interest...

APV isolates the base unlevered project value and then adds present value of financing side effectstax shields, concessional loan subsidies, guaranteeissue costsideally suited when financing is non-standard and project risk differs from the firms average.

concessional government loan carrying interest below market and a partial guarantee fee. The project also yields interest tax shields and has expected flotation costs. Risk is project-specific and different from the firm’s existing assets. Which valuation framework most appropriately captures these features?

A WACC using current firm capital structure and market rates

B Dividend Discount Model with adjusted growth

C Adjusted Present Value (APV) separating unlevered value, tax shields, subsidies, and issue costs

D Residual Income model ignoring financing side effects

E NPV using book WACC and including subsidy as negative cost

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A project will be financed with a mix of equity and a

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