How is a firm’s intrinsic (or fundamental) value related to its freecash flows and its cost of capital? Write out the free cash flowequation and explain what it means.

Q: How do I calculate a company’s free cash flow if it is all-equity financed?

A: In case the firm is fully equity financed, free cash flow = Cash flow free from all kind of claims =…

Q: Why are accruals called spontaneous sources of funds, what are their costs, and why don't firms use…

A: Under the business setting, the spontaneous funds source states to the financing that arises from…

Q: Explain the use of real and nominal discount rates in discounting cash flows. Which is used more…

A: Real Discount Rates A real interest rate is the interest rate that takes inflation into account.…

Q: What are the advantages of the free cash flow valuation modelrelative to the dividend growth model?

A: Introduction: The measurement of financial performance calculated as operating cash flow less…

Q: How does sales stability affect the target capital structure?

A: Target capital structure: Target capital structure is defined as the combination of debt, preferred…

Q: How does additional debt in a firm influence its WACC? its free cash flow (FCF)? the agency costs of…

A: Debt is the presence of additional financial leverage in the total business and it will be having…

Q: In comparison to free cash flow valuation, what's the main issue with dividend valuation?

A: Dividend discount model is a DCF model which assumes that the price of a stock should be equal to…

Q: When calculating an i* value, all net positive cash flows are assumed to be reinvested at:a. the…

A: Cost of Capital: For financing operations, a firm can raise long term funds through a combination of…

Q: What information can a statement of cash flows provide about a company’s financingactivities that…

A: Cash flow statement: A type of financial statement which shows the cash position of a business by…

Q: What is the impact of working capital on the cash flow statement?

A: Statement of cash flows: This statement reports all the cash transactions which are responsible for…

Q: What is the Free Cash Flow to Equity (FCFE)model? How might it be applied? When is it…

A: FCFEIt is the measurement of availability of cash to the company’s shareholder of equity share after…

Q: using the free cash flow valuation model show the only avenues by which capital structure can affect…

A: While utilizing the model of free cash flow valuation there’re many values that might be considered.…

Q: What is a firm’s net working capital? And what does it tell you about the liquidity of the firm?

A: Working capital of the firm means net assets of the firm. Working capital can be find as total…

Q: What is FCF (Free Cash Flow) to Equity ratio?

A: The amount of cash generated by a company that is available to be transferred to shareholders is…

Q: How do free cash flows and the weighted averagecost of capital interact to determine a firm’s value?

A: Free cash flows to the firm (FCFF) are the cash flows that a firm expects to earn from its…

Q: How is working capital handled in the calculation of cash flows from a capital investment? Is it…

A: Working capital or net working capital is equals to firm’s current assets minus current liabilities,…

Q: What is the significance of the FCF (Free Cash Flow) in the area of valuation?

A: Cash flows refer to the cash expenditure and cash receipt of the business over a specific time…

Q: Describe the overall cash flow through the firm in terms of operating flows, investments flows, and…

A: A cash flow statement shows the categorical representation of cash inflows and outflows for the…

Q: How can we develop the techniques for establishing cash flow equivalence with compound-interest…

A: Answer: To measure the equivalence of the sequence of compound interest factors used to extract the…

Q: On the basis of this information, what is LeCompte's optimal capital structure, and what is the…

A: Beta shows the relation between expected return of investment and systematic risk. CAPM use beta to…

Q: What is float? How do firms use float to increase cash managementefficiency?

A: Financially, the float consists of cash that is shortly measured twice as long as a deposit is…

Q: What does a firm's statement of cash flows report?

A:

Q: Why can it be misleading to use a firm's working capital to discuss cash flow without further…

A: Working capital and cash flows are the important aspects of an organization that helps an investor…

Q: What are the advantages/disadvantages of using the discounted cash flows method of estimating the…

A: Discounted cash flows method : Discounted cash flow method considers the time value of money in…

Q: easier to calculate directly, the expected rate of return on the assets of a firm or the expected…

A: The return on assets states how profitable the assets of company are in generating the revenue. To…

Q: Define the positive cash flows?

A: The positive cash flow is the state of the organization wherein money inflows to an enterprise over…

Q: What should a firm’s goal be regarding the cash conversion cycle,holding other things constant?…

A: The cash conversion cycle refers to the number of days between paying for crude materials or…

Q: The net present value of an investment represents the difference between the: present value of cash…

A: To determine the value of NPV, NPV is the difference between the present values of future cash flows…

Q: What is free cash flow to equity (FCFE)?

A: Introduction: Cash flow is nothing but the cash actually receiving less cash outlay or outflow from…

Q: Discuss the main difficulties that are faced in calculating an appropriate cost of capital using…

A: The dividend discount model is a method used for projecting a company's stock price based on the…

Q: .What is the operating cash flow (OCF)?

A: Cash Flows from Operations is one of the heads under the Cash Flow Statements. It seeks to find out…

Q: What is the operating cash flow? The capital spending? The change is net working capital? The cash…

A: Capital spending is termed as the amount spent by the firm in the year to purchase or maintain the…

Q: How to do Cash Flow Projection when investing? give a example.

A: Cash flow cash flow (CFI) is one of the components of a cash flow statement that reports the amount…

Q: Which of the following would increase cash flow for a firm? a. A purchase of fixed assets b. Cash…

A: In this question we are given 4 options related to cash flow and we require to select the correct…

Q: Using the free cash flow valuation model, show the only avenues by which capital structure can…

A: With using of the FCF valuation model, the basic definition through the capital structure used…

Q: What is the relationship between the predictability fo a firm's cash inflows and its required level…

A: Working capital, otherwise called net working capital (NWC), is the distinction between an…

Q: Using the free cash flow valuation model, identify avenues by which capital structure can affect the…

A: According to second preposition of the Modigliani and Miller approach, value of firm changes due to…

Q: How do “windows of opportunity” impact a firm’s capital structure?

A: Windows of opportunity : In simple words, windows of opportunity, in this context, relates to the…

Q: What is the risk-return tradeoff that arises when a firm manages its working capital? Give tangible…

A: Risk is referred as the probability or chance, which has an outcome or actual gains of an…