Question

the Enterprise Value of a firm (using the DCF valuation methodology) is arrived at by discounting the after-tax free Cash & Capital Flows available to the firm by the Weighted Average Cost of Capital (WACC). True or False

Answer #1

the Enterprise Value of a firm (using the DCF valuation methodology) is arrived at by discounting the after-tax free Cash & Capital Flows available to the firm by the Weighted Average Cost of Capital (WACC).

**correct answer : False**

we need to calculate free cash flow to calculate the value of firm. capital flows mean investment in fixed assets and working capital. we deuct them so that we can arrive at free cashflow which is used in value of firm.

so Free cash flow (FCF) is a measure of how much cash a business generates after accounting for capital expenditures. This cash can be used for expansion, dividends, reducing debt, or other purposes.

secondly, if firm's cash flow are growing at regular rate, then we have to use a formula which also uses "g" = growth rate. if growth rate is zero, then only WACC will be considered

see image

which will clear the concept

The prevalent form of the DCF model in practice is the two-stage
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correct?
A.
Stage #2 calculates the terminal value by estimating the value
of the company at the end of stage #1 then discounting it to the
present.
B.
The enterprise value will equal Stage #1 minus Stage #2.
C.
All cash flows are discounted using the weighted average cost of
capital (WACC).
D.
Stage #1 projects unlevered FCFs...

You are trying to calculate the enterprise value of DCB Corp
using a free cash flow model. To that end you have put together
some forecast for year 1 in the table below. Assume that free cash
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cost of capital of the firm (WACC) is 8%. Using this information,
calculate the enterprise value of the firm. Express your answer in
$-millions and round to two decimals (do not...

True or false.
In DCF valuation, a company can increase its equity value by
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exceeds the return on capital. (Assume all other inputs are
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Which of the following statements about valuing a firm using the
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discounting the free cash flows beyond the horizon date and any tax
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Considering the valuation of mergers, which of the following is
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A.
In a merger with true synergies, the post-merger value exceeds
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B.
Only if a target firm's value is greater to the acquiring firm
than its market value as a separate entity will a merger be
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C.
If the capital structure is stable, and free cash flows are
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debt (rd x (1 - Tc)). (Assume all other inputs are fixed.)
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The corporate valuation model, the price-to-earnings (P/E)
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Please post the answer in an Excel Document
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Recommend acceptance of this project using net present value
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Display your calculations.

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Involves discounting USD cash flows at the subsidiary’s cost of
capital
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in perpetuity. Measure the value of this company as of today
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