Chapter 18 Flashcards
1
Q
Adjusted present Value Method
A
A method where you determine the levered value of an investment by first calculating its unlevered value, and then adding the value of the interest tax shield
2
Q
Target Leverage Ratio
A
When a firm adjusts its debt proportionally to a project’s value or its cash flows. Proportion does not need to be constant.
3
Q
Flow to Equity Method (FTE)
A
you calculate the free cash flow available to equity holders after taking into account all the payments to and from debt holders
4
Q
Constant interest coverage ratio
A
When the firm keeps its interest payments to a target fraction of its FCF
