Background Note | HBS Case Collection | January 1993 (Revised October 1994)

Note on Adjusted Present Value

by Timothy A. Luehrman


Describes the "adjusted present value" (APV) approach to discounted cash flow analysis. Much of the note is devoted to a critical comparison of APV and an approach based on the wrighted average cost of capital (WACC). Argues that APV is usually, if not always, simpler, more accurate, and/or more informative than using the WACC. Designed to be distributed in conjunction with a case on valuation and captial budgeting. Assumes students are familiar with the WACC but not with APV.

Keywords: Valuation; Cost of Capital;


Luehrman, Timothy A. "Note on Adjusted Present Value." Harvard Business School Background Note 293-092, January 1993. (Revised October 1994.)