1 answer

What effect will subsidized loans have? Multiple Choice They will increase the APV of a project....

Question:

What effect will subsidized loans have?

Multiple Choice

  • They will increase the APV of a project.

  • They will decrease the APV of a project.

  • They will not affect APV.

  • None of the options.


Answers

Subsidized loans will have a lower interest rate than the market rate. Tax savings and loan payments are discounted at the normal risk-free rate, this will cause increase in APV.

Hence, correct option is “They will increase the APV of a project.”

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