In the flow-to-equity (FTE)valuation method,the cash flows to ________ are then discounted using the ________ cost of capital.

Question

Quizplus · Accepted Answer

In the FTE valuation method, the cash flows to equity holders are discounted, not those to debt holders. These cash flows are discounted using the cost of equity, not the weighted average cost of capital. Therefore, the best choice is C - equity holders and equity cost of capital.

In the Flow-To-Equity (FTE)valuation Method,the Cash Flows to ________ Are