WACC Can Be Used to Determine the Value of a Firm

question 54

Multiple Choice

WACC can be used to determine the value of a firm by discounting the firm's:

• A) after-tax net profits.
• B) pretax profits.
• C) cash inflows.
• D) free cash flows.

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Definitions:

External Users

Individuals or organizations outside of a company who have an interest in the company's financial information, such as investors, creditors, and regulatory bodies.

Accounting Information

The systematic and comprehensive recording of financial transactions pertaining to a business, which is used for analysis, planning, and decision-making.

Cash Flows

The total amount of money being transferred into and out of a business, particularly affecting its liquidity, operational capabilities, and financial health.

Statement

A record that summarizes financial activities, such as income and expenses, over a specific period.