One of the main adjustments to the APV method

One of the main adjustments to the APV method is to add the present value of the interest tax shields True False In evaluating the business strategy, you look at the economic conditions and the industry True FalseMarketable securities are an example of a non-operating assetThe investment goal is to earn a cost of capital that is greater than the returnTrue FalseOperating cash flows do not considerA.Cost of goods soldB.Sunk costsC.TaxesD.SalesCal is considering a new project. The project will generate revenues of $16 million and operating costs of $7,000,000 annually for the next 5 years. Interest expense is $1,000,000 per year. It requires an additional machine that costs $20 million dollars and will be fully depreciated (to a zero book value) on a straight line basis over 5 years. The machine has a salvage value of $2,000,000. Cal’s tax rate is 30%. The beta of the project is 1.30. The risk-free return is 5% and the return on the market is 15%. What is the net present value of the project?A. 1,876,716 B. 2,138,981 C. 4,328,001 D. 4,065,736 E. 1,046,800The APV method is comprised of the all equity NPV of a project and the NPV of financing effects. The financing effects can includeA.Issue costsB.Financial distress costsC.Interest tax savingsD.All of the aboveWhen using adjusted present value, the discount rate is theA.cost of equityB.weighted average cost of capitalC.unlevered cost of capitalTwo firms may not be comparable becauseA.Data has been restatedB.Differences in reporting periodsC.Accounting differencesD.All are reasons the data may not be comparableOne example of a value driver isA.Earnings before taxB.Weighted average cost of capitalC.Debt-equity ratioD.Growth duration