Question

I recently came across the abbreviation APV. What does it stand for and how is it applied in valuation?

Answer 1

APV stands for Adjusted Present Value. It is a valuation method that separates the financing effect coming from the leverage and the value of a company as if it were entirely financed by equity. Hence, the value of the company will be the sum of both. APV and DCF models should however give the same results in the case a stable capital structure.