Adjusted Present Value Template
This adjusted present value template guides you through the calculation of APV starting with the value of unlevered project and PV of debt financing.
Below is a preview of the adjusted present value template:
Download the Free Template
Enter your name and email in the form below and download the free template now!
Adjusted Present Value (APV) is used for the valuationValuation MethodsWhen valuing a company as a going concern there are three main valuation methods used: DCF analysis, comparable companies, and precedent transactions. These methods of valuation are used in investment banking, equity research, private equity, corporate development, mergers & acquisitions, leveraged buyouts and finance of projects and companies. It takes the net present value (NPV), plus the present value of debt financing costsCost of DebtThe cost of debt is the return that a company provides to its debtholders and creditors. Cost of debt is used in WACC calculations for valuation analysis. Learn the formula and methods to calculate cost of debt for a company based on yield to maturity, tax rates, credit ratings, interest rates, coupons, and, which include interest tax shieldsInterest Tax ShieldsThe term "interest tax shields" refers to the reduced income taxes brought about by deductions to taxable income from a company's interest expense. For instance, there are cases where mortgages may have an interest tax shield for buyers since the mortgage interest is deductible against income., costs of debtCost of DebtThe cost of debt is the return that a company provides to its debtholders and creditors. Cost of debt is used in WACC calculations for valuation analysis. Learn the formula and methods to calculate cost of debt for a company based on yield to maturity, tax rates, credit ratings, interest rates, coupons, and issuance, costs of financial distress, financial subsidies, etc..
The Adjusted Present Value for valuation
The APV method to calculate the levered value (VL) of a firm or project consists of three steps:
Step 1
Calculate the value of the unlevered firm or project (VU), i.e. its value with all-equity financing. To do this, discount the stream of FCFsFree Cash Flow (FCF)Free Cash Flow (FCF) measures a company’s ability to produce what investors care most about: cash that's available be distributed in a discretionary way by the unlevered cost of capitalUnlevered Cost of CapitalUnlevered cost of capital is the theoretical cost of a company financing itself for implementation of a capital project, assuming no debt. Formula, examples. The unlevered cost of capital is the implied rate of return a company expects to earn on its assets, without the effect of debt. WACC assumes the current capital (rU).
Step 2
Calculate the net value of the debt financing (PVF), which is the sum of various effects, including:
- PV(Interest tax shields) – our main focus
- PV(Issuance costs)
- PV(Financial distress costs)
- PV(Other market imperfections)
Step 3
Sum up the value of the unlevered project and the net value of debt financing to find the adjusted present value of the project. That is, VL = VU + PVF.
More Free Templates
For more resources, check out our business templates library to download numerous free Excel modeling, PowerPoint presentation and Word document templates.
- Excel Modeling TemplatesExcel & Financial Model TemplatesDownload free financial model templates - CFI's spreadsheet library includes a 3 statement financial model template, DCF model, debt schedule, depreciation schedule, capital expenditures, interest, budgets, expenses, forecasting, charts, graphs, timetables, valuation, comparable company analysis, more Excel templates
- PowerPoint Presentation Templates
- Transaction Document TemplatesTransactionsDownload free transaction templates including a Letter of Intent (LOI), Term Sheet, Non-Disclosure Agreement (NDA), Confidential Information Memorandum (CIM), Equity Capital Markets (ECM) memo, Due Diligence checklist, and other types of corporate transactions. Download the Word Document files for your own use
