Question 1

If a firm generates a rate of return on __________________________________________________ equal to the discount rate used by the investor then it does not matter if an analyst uses cash flows to the investor or cash flows to the firm.

Accepted Answer

The answer of If a firm generates a rate of...

Question 2

Suppose a firm faces the following costs of capital:
  Assume that this firm expects to generate $80 million of pretax-free cash flows.
Required:
(1)What would be the after-tax free cash flows one year from today?
(2)Assuming a one-year horizon,what is the appropriate valuation to be used by the analyst?

Accepted Answer

The answer of Suppose a firm faces the following costs...

Exam 12: Valuation: Cash-Flow-Based Approaches

If a firm generates a rate of return on __________________________________________________ equal to the discount rate used by the investor then it does not matter if an analyst uses cash flows to the investor or cash flows to the firm.