how do I respond to this discussion post with sources and citations? To understand the CAPV model you must understand the APV model. The APV model is simply the adjusted present value of a company with accounting of the debt. APV you take the Unlevered Cashflow divided by the Unlevered cost of equity and then add the affects of debt and then subtract the initial investment. If this is greater than zero then you proceed. Obviously you wouldn't be investing into a company with a negative cash flow. The cost of equity will also be positive because the interest in debt can be a write off for taxes, or called a tax shield. The Compressed Adjusted Present Value is useful as a method to calculating the Terminal Value allows for non-zero growth by discounting the tax shield at the unlevered cost of equity whereas the general APV model includes both the value of the firm as if it were all equity financed and the present value of financing side effects