APV · Adjusted present value
Splits enterprise value into unlevered operating value and financing side effects like the debt tax shield, priced separately — suited to companies whose leverage path will change materially, where a fixed-WACC assumption breaks down.
- Guide level
- Practical
- Output
- Intrinsic value
Core formula
Enterprise value = unlevered operating value (FCFF discounted at the unlevered cost of equity) + PV of debt tax shields − PV of distress costsHow to interpret it
Splits enterprise value into unlevered operating value and financing side effects like the debt tax shield, priced separately — suited to companies whose leverage path will change materially, where a fixed-WACC assumption breaks down.
The output should be read as a scenario or decision aid, not as a guaranteed price target. Compare it with at least one method based on different economic assumptions.
Practical workflow
- Normalize the latest public financial and operating data.
- Choose assumptions that match the company's economics and accounting structure.
- Calculate conservative, base and optimistic cases where the method permits.
- Compare the result with market pricing and an independent valuation method.
- Document the assumptions that drive the largest changes in value.
Key limitation
Requires a subjective future debt path and distress-cost estimate; offers little extra insight when leverage is stable.
How Stockinsky uses it
Stockinsky uses this framework only when the company type and available data support it. Professional valuations expose assumptions, sources and warnings instead of presenting false precision.