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Which of the following statements concerning the compressed adjusted present value (APV) model is NOT CORRECT
a. The value of a growing tax shield is greater than the value of a constant tax shield.
b. For a given D/S, the levered cost of equity is greater in the compressed APV model than the levered cost of equity under MM's original (with tax) assumptions.
c. For a given D/S, the WACC is greater in the compressed APV model than the WACC under MM's original (with tax) assumptions.

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Answer:

e. The tax shields should be discounted at the cost of debt

Explanation:

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