It Can Be Difficult for Investors to Actually Observe the Value

question 13

True/False

It can be difficult for investors to actually observe the value created by a firm (such as Walt Disney)as it shares activities and transfers core competencies.

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Definitions:

Cost of Equity

The return a company theoretically pays to its equity investors to compensate them for the risk they undertake by investing in the stock.

WACC

Weighted Average Cost of Capital. It represents the average rate that a company is expected to pay to finance its assets, weighted according to the proportion of equity and debt in its capital structure.

Free Cash Flow

The amount of cash generated by a business that is available for distribution among all the securities holders of an organization, including dividends, share repurchases, and debt repayments.

Cost of Equity

The return that investors require for investing in a company's equity, often estimated using models such as the Capital Asset Pricing Model (CAPM).