Adjusted Present Value (APV) is a project valuation method developed by Stewart Myers that separates the total value of an investment into two components: the base-case NPV of the project if it were entirely equity-financed (ignoring the benefits of debt financing), and the present value of financing side effects — primarily the tax shield from interest deductions on debt. APV = Base-Case NPV (all-equity) + PV of Financing Benefits. This separation makes APV particularly useful for valuing leveraged buyouts, project finance structures, and companies with complex, changing capital structures — situations where the standard WACC-based DCF analysis becomes unreliable because the debt-equity ratio changes significantly over the investment horizon. In India, APV analysis is used by investment banks and private equity firms structuring leveraged acquisitions, large infrastructure project financings, and complex restructuring transactions where the tax shield from debt creates meaningful additional value. For Indian infrastructure and power projects — which typically use high debt leverage with tax-efficient structures — APV provides a more accurate valuation than WACC-based methods when the capital structure is expected to change materially as the project progresses from construction to operation phases.
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