Free cash flows should be discounted at the firm's weighted average cost of capital to find the value of its operations.

Question

Quizplus · Accepted Answer

The firm's weighted average cost of capital represents the opportunity cost of the firm's capital, and by discounting the free cash flows at this rate, we can find the present value of the firm's future cash flows, which represents the value of its operations.

Free Cash Flows Should Be Discounted at the Firm's Weighted