Solution of the Menko case (finance)

Overview: The Zambian proposal is prima facie tempting. But in order to accurately evaluate its contribution to the wealth of Menko's shareholders, it should be analyzed more in-depth. We will do this using the Adjusted Present Value approach. The Adjusted Present Value (APV), as developed by Myers , defines the value of a levered firm as the value of an otherwise identical but unlevered firm plus the value of any "side effects" due to leverage. These …showed first 75 words of 2050 total…

…showed last 75 words of 2050 total…The correct value of the cheap financing was incorporated within the AVP calculations when we added the NPV of the Japanese debt to the base-case NPV. Therefore, the best approach would be to observe the whole proposal from the parent company's view, after translating all figures into dollar amounts, based on a reasonable exchange rate forecast, just as we have done here. As discussed above, this approach reveals the "true face" of the Zambian proposal.