Define the problems into capital budgeting analysis, Financial Management

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What problems can take place into the capital budgeting analysis if project debt is evaluated in place of the borrowing capacity created by the project?

If project debt is greater or less as compared to the borrowing capacity made by the capital project, and tax shields on the actual new debt are utilized in the analysis, the APV will be overstated (understated) making the project unjustly come out more (less) attractive than it actually is.

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