Which of the following valuation methods use(s )the weighted average cost of capital (WACC )as the discount factor?
I.The economic profit model.
II.The adjusted present value model.
III.The discounted cash flow model.
IV.None of the above.

Question

Quizplus · Accepted Answer

The discounted cash flow (DCF) model uses the weighted average cost of capital (WACC) as the discount factor to calculate the present value of future cash flows. The economic profit model also incorporates WACC to assess a company's value by considering its return on invested capital relative to its cost of capital. The adjusted present value model, however, uses a different approach by considering tax shields and other factors separately, not directly applying WACC as the primary discount factor.

Which of the Following Valuation Methods Use(s )The Weighted Average