Exam 12: Valuation: Cash-Flow Based Approaches

The risk-adjusted discount rate used to compute the present value of all the projected free cash flows for common equity shareholders equals the _______________________________________________________.

________________________________________ typically include accounts payable, accrued expenses, accrued taxes, deferred taxes, pension obligations and other retirement benefit obligations.

Regarding the equity buyout, compute the cost of equity capital with the new capital structure that results from the LBO. Assume a risk-free rate of 3.75percent and a market risk premium of 5.0 percent.

Houston, Inc. The following information pertains to Houston, Inc. a manufacturer of belt buckles: What is Houston's free cash flow for all debt and equity holders for year 2012?

The present value of future free cash flows valuation method focuses on free cash flows, a base that economists argue has more economic meaning than ____________________.

The cash-flow-based valuation approach measures and values the cash flows that are "free" to be ________________________________________ unencumbered by necessary reinvestments in operating assets or required payments to debt holders.

Net cash flow from operations ________________ dividends equals_______________________

When should an analyst use nominal cash flows and when should an analyst use real cash flows?

Provide the rationale for using expected free cash flow in valuation.

Discuss under which scenario it is appropriate to use free cash flows for all debt and equity capital stakeholders.

If the objective is to value operating assets net of operating liabilities of a firm then the appropriate free cash flow measure to be used is ______________________________________________________________________.

If an analyst wants to value a potential investment in the common stock equity of a firm, the analyst should discount the projected free cash flows at the:

What is the purpose of a free cash flow analysis?

Explain "free" cash flows. Describe which types of cash flows are free and which are not. How do free cash flows available for debt and equity stakeholders differ from free cash flows available for common equity shareholders?

A disadvantage of the free cash flow valuation method is:

The conceptual framework for free cash flows separates all assets and liabilities into the following categories:

Financial liabilities include all of the following except:

Even in relatively efficient securities markets, ______ is observable but ______ is not; therefore, ______ must be estimated.

Steady-state growth in ___________________________________ could be driven by long-run expectations for growth attributable to economy-wide inflation, general economic productivity, the population, or long-run growth in industry's sales.

Regarding the equity buyout, compute the weighted average cost of capital of the new capital structure.