The Most Appropriate Discount Rate to Use When Applying a FCFF

question 5

Multiple Choice

The most appropriate discount rate to use when applying a FCFF valuation model is the

• A)required rate of return on equity.
• B)WACC.
• C)risk-free rate.
• D)required rate of return on equity or risk-free rate, depending on the debt level of the firm.

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Definitions:

State Law

Law established by each state in the United States, governing within its own territory and subject to the federal constitution.

Risk-Utility Analysis

An assessment method used to determine if the benefits of a certain action or product outweigh its risks, often used in product liability law.

Sperry-New Holland

A brand known for its agricultural machinery and equipment, historically significant in the mechanization of agriculture.

Unreasonably Dangerous

Describes a product or condition that poses a risk of harm beyond what would be expected by the ordinary consumer.