The Value of a Firm Is Best Defined as the

question 14

Multiple Choice

The value of a firm is best defined as the

• A)sum of all of the firm's future cash flows.
• B)current year's cash flow times (1 + g).
• C)current year's cash flow divided by r.
• D)total present value of all of the firm's future cash flows.
• E)current year's cash flows divided by (g - r).

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Definitions:

Discount Rate

Employed in discounted cash flow analysis, this interest rate is used for determining the current value of cash flows that will be received in the future.

Annual Payments

Regular payments made once a year, often associated with loan repayments or insurance premiums.

Discount Rate

This is the discount rate used in the process of DCF to calculate the present value of cash flows that are to be received in the future.

Present Value

Today's calculated value of a future monetary sum or cash flow patterns, utilizing a specific rate of return.