The appropriate measures of free cash flow and discount rate to use when estimating the total value of a firm, respectively, are: Measure of free cash flow Discount rate A. operating cash flow before interest cost of equity payments on debt B. operating cash flow before interest weighted average payments on debt cost of capital C. operating cash flow before interest payments on cost of equity debt but after deducting base capital expenditures D. operating cash flow before interest payments on weighted average debt but after deducting base capital cost of capital expenditures 4Q- 83 the Free cashflow concept is equal to CFO-Capital expenditure. the interest payments have already been deducted in CFO. why in all choice, they are saying operating CF before interest payment??? not quite understand.
is it D?
B?
yes, it is d. who knows the logic of “operating CF before interest payment”
annexguy Wrote: ------------------------------------------------------- > yes, it is d. > who knows the logic of “operating CF before > interest payment” Because it’s CF to the firm, including equity owner and creditor. interest paid to creditor should be added back to CFO.
hopetobeat Wrote: ------------------------------------------------------- > annexguy Wrote: > -------------------------------------------------- > ----- > > yes, it is d. > > who knows the logic of “operating CF before > > interest payment” > > > Because it’s CF to the firm, including equity > owner and creditor. interest paid to creditor > should be added back to CFO. Correct
wow! this is the perfect example of me making a stupid mistake (again!!!)…either I do not read the question completely or go through all the answer choices completely!