Question

If you are trying to determine the value of a firm, which of the following factors...

If you are trying to determine the value of a firm, which of the following factors would be relevant?

the interest rate (the discount rate)

costs incurred by the firm

revenues generated by the firm

all of the above are relevant
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Answer #1

All the above are relevant.

Interest Rate

It is relevant because while valuing a firm, the current and future cashflows of the firm are discounted using this interest rate and as this rate changes, the value of the firm also changes.

Costs Incurred by firm

Costs incurred by the firm are a type of negative cash-inflows. So as they change, the value of the firm also changes. Higher costs means, lower value of the firm and vice-versa

Revenues  

Revenues are the cash-inflows for the firm. Higher are the revenues, higher likeliness/probability of profit, hence higher is the value of the firm. So any changes in the revenue, vis-a-vis the cost, leads to change in the value of the firm

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