Question

Discuss three sources of difference between “Cash provided by operations” and “Free Cash Flows.”

Firm’s Weighted Average Cost of Capital (WACC)

Divisional WACC

Project Specific WACC

Answer 1

1) cash flows from operations are cash genrated from operations where as free cash flows is net cash available to the firm

2) operating cash flows are shown as cash flow from operations in cash flows from operations and free cash flow is total of cash generated from operating investing and financing activities

3) operating cash flow shows the operating efficiency where as free cash flows shows cash available to the firm

Wacc)

Wacc of the firm is weighted average cost of capital of the securities of whole company

And a company will has many divisions some times company will finance each division separately so division wacc is specific to division so it's wacc will depend on risks associated with the divisions

And project wacc is weighted average cost of capital to finance the project and it is project specific