Present value of free cash flow to equity resembles the present value of earnings concept except that it includes the capital expenditures required to maintain and grow the firm and the change in working capital required for a growing firm.

Question

Quizplus · Accepted Answer

The statement is true. The present value of free cash flow to equity takes into account the capital expenditures and changes in working capital required to maintain and grow the firm, along with the present value of expected earnings. This approach helps investors and analysts assess a company's ability to generate cash flows in the future and create shareholder value over the long term.

Present Value of Free Cash Flow to Equity Resembles the Present