The APV method is comprised of the all equity NPV of a project and the NPV of fi

Question

The APV method is comprised of the all equity NPV of a project and the NPV of financing effects. The three possible side effects are:

1-tax subsidy of dividends, cost of issuing new securities, subsidy of financial distress and cost of debt financing.
2-cost of issuing new securities, cost of financial distress, tax subsidy of debt and other subsidies to debt financing.
3-cost of issuing new securities, cost of financial distress, tax subsidy of dividends and cost of debt financing.
4-subsidy of financial distress, tax subsidy of debt, cost of other debt financing and cost of issuing new securities
5-None of the above.

Explanation / Answer

2-cost of issuing new securities, cost of financial distress, tax subsidy of debt and other subsidies to debt financing.

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