A Question Regarding Adjusted Present Value

I am self-learning the Mckinsey Valuation book. It teaches the Adjusted Present Value method for valuing companies.

The APV definition is as follow: Adjusted Present Value = Enterprise Value as if the Company Was All-Equity Financed + Present Value of Tax Shields

To use the above APV equation, I have to discount projected free cash flow at the unlevered cost of equity (ku) to calculate the Enterprise Value.

And there are two methods to assume the value of unlevered cost of equity (ku).

Particularly for the first method, the book says: "Method 1: Assume risk of tax shields (ktxa) equals risk of operating assets (ku). If you believe the company will manage its debt-to-value ratio to a target level (the company’s debt will grow with the business), then the value of the tax shields will track the value of the operating assets. Thus, the risk of tax shields will equal the risk of operating assets (ktxa = ku)."

Logically, it makes sense to me because managers will adjust leverage up or down according to prevailing business conditions. If so, then future interest payments (also tax shields) will fluctuate for the same reasons that operating cash flows fluctuate and therefore deserve the same discount rate.

But I dont understand the math.. Because Equity + Debt = Enterprise Value = Operating Value Assets + Non-operating Assets.

So mathematically, if the company maintains a stable debt-to-value ratio, it doesn't necessarily that the amount of debt tracks the amount of Operating Value Assets (since there are also Non-operating Assets).

I just dont quite get the math.. Is it because the Non-operating Assets are so insignificant in numbers so they just simplify the qualitative explanation?

Thank you for reading such a long question!!

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