"APV under the Microscope: A Critical Assessment of its Valuation Supremacy in Merger and Acquisition"

Abstract

This study investigates the efficacy of two prominent valuation methods, Weighted Average Cost of Capital (WAAC) and Adjusted Present Value (APV), in assessing the financial performance and worth of companies with complex financial structures and varying cash flows. Our analysis reveals that APV, which considers tax benefits and other non-operating items, provides a more comprehensive and accurate valuation compared to WAAC. The results show that APV valuations are lower than WAAC valuations, considering significant tax benefits and debt. This research contributes to the ongoing debate on valuation methods and provides insights for investors, analysts, and researchers seeking to accurately value companies with complex financial profiles.