Question

What is the benefit of valuing the enterprise operations relative to valuing the firm’s equity? (choose all that apply)

Group of answer choices

a.helps us to focus on the cost of capital

b.the analyst does not need to forecast the firm’s future leverage

c.allows for a cleaner analysis with fewer assumptions

d.helps to determine the ideal amount of debt the company should carry

e.allows focus on a company’s ability to raise capital

Answer 1

Option B, C is correct

Because enterprise value is a broader concept then equity value and that's why we don't need much assumptions, hence it will cover more concept. And future leverage simply means how a company is getting its assets through debts or through equity so we don't need to use leverage here as well.

a) cost of capital is not a part enterprise value because it is not affected by it.

(d,e )both are not included because they will come in firms Equity balance