WACC can be used to determine the value of a firm by discounting the firm's:

Question

Quizplus · Accepted Answer

WACC is the weighted average cost of capital, which takes into account the cost of both debt and equity financing for a company. To determine the value of a firm, it is necessary to discount the expected future cash flows generated by the company. These cash flows can be represented by a company's free cash flows, which account for all cash inflows and outflows from operating activities, capital expenditures, dividend payments, and other financing activities. Therefore, using WACC to discount a company's free cash flows is the most appropriate method to determine its value.

WACC Can Be Used to Determine the Value of a Firm