Journal of Business Valuation and Economic Loss Analysis
Editor-in-Chief: Ewing, Bradley T. / Hoffman, Jim
SCImago Journal Rank (SJR) 2015: 0.124
Source Normalized Impact per Paper (SNIP) 2015: 0.084
Impact per Publication (IPP) 2015: 0.105
WACC or APV?
Citation Information: Journal of Business Valuation and Economic Loss Analysis. Volume 2, Issue 2, ISSN (Online) 1932-9156, DOI: 10.2202/1932-9156.1016, January 2008
- Published Online:
Miller and Modigliani's seminal papers (1958, 1963) gave rise to two alternative methodologies for project and firm valuations: the Weighted Average Cost of Capital (WACC) and Adjusted Present Value (APV). As is often the case of many larger firms in industrialized economies, whenever a target debt ratio is set up for the long term, WACC might be a good approximation. However, APV has certain advantages making it more convenient for smaller companies with unstable debt ratios, in countries with complex tax legislation and in emerging markets where high economic uncertainty makes the leveraging decision much more opportunistic.