what does adjusted present value tell you 
the adjusted present value helps to show an investor the benefits of tax shields resulting from one or more tax deductions of interest payments or a subsidized loan at below market rates for leveraged transactions apv is preferred in particular leveraged buyout situations are the most effective situations in which to use the adjusted present value methodology the value of a debt financed project can be higher than just an equity financed project as the cost of capital falls when leverage is used using debt can actually turn a negative npv project into one that s positive npv uses the weighted average cost of capital as the discount rate while apv uses the cost of equity as the discount rate example of how to use adjusted present value apv in a financial projection where a base case npv is calculated the sum of the present value of the interest tax shield is added to obtain the adjusted present value for example assume a multi year projection calculation finds that the present value of company abc s free cash flow fcf plus terminal value is 100 000 the tax rate for the company is 30 and the interest rate is 7 its 50 000 debt load has an interest tax shield of 15 000 or 50 000 30 7 7 thus the adjusted present value is 115 000 or 100 000 15 000 the difference between apv and discounted cash flow dcf while the adjusted present value method is similar to the discounted cash flow dcf methodology adjusted present cash flow does not capture taxes or other financing effects in a weighted average cost of capital wacc or other adjusted discount rates unlike wacc used in discounted cash flow the adjusted present value seeks to value the effects of the cost of equity and cost of debt separately the adjusted present value isn t as prevalent as the discounted cash flow method limitations of using adjusted present value apv in practice the adjusted present value is not used as much as the discounted cash flow method it is more of an academic calculation but is often considered to result in more accurate valuations 