Under the present value of operating free cash flow technique,the firm's operating free cash flow to the firm is discounted at the firm's
A) Weighted average cost of capital.
B) Cost of debt.
C) Internal rate of return.
D) External cost of new equity.
E) Net present value.

Question

Quizplus · Accepted Answer

The present value of operating free cash flow technique involves discounting the cash flows at the firm's cost of capital, which is typically represented by the weighted average cost of capital (WACC). This represents the overall cost of financing for the firm, including both equity and debt financing. Using the WACC as the discount rate ensures that the present value calculation takes into account the risk and return associated with the firm's investments and financing decisions. Therefore, the best choice is A.

Under the Present Value of Operating Free Cash Flow Technique,the