If an analyst wants to value a potential investment in the common stock equity of a firm,the analyst should discount the projected free cash flows at the:
A) required return on equity capital.
B) weighted average cost of capital.
C) risk-free rate.
D) market risk premium.

Question

Quizplus · Accepted Answer

The required return on equity capital is the appropriate discount rate for valuing a potential investment in the common stock equity of a firm because it reflects the risk and return characteristics of the investment.

If an Analyst Wants to Value a Potential Investment in the Common