For a particular valuation model if the cash flows are cash flows to the company’s suppliers of capital (Free Cash Flow to the firm) the analyst uses the WACC of the company in the valuation. If these cash flows are strictly those belonging to the company’s owner, such as the free cash flow to equity or dividiends, these analyst use the cost of equity capital to find the present value of these flows.
nc_analyst Wrote: ------------------------------------------------------- > For a particular valuation model if the cash flows > are cash flows to the company’s suppliers of > capital (Free Cash Flow to the firm) the analyst > uses the WACC of the company in the valuation. If > these cash flows are strictly those belonging to > the company’s owner, such as the free cash flow to > equity or dividiends, these analyst use the cost > of equity capital to find the present value of > these flows. correct. and use the marginal kost of cap for those NPV projects.