The final step when applying enterprise value analysis to the evaluation of business strategies is:
A)The estimation of cash-flows generated by the business for the next 10 years
B)The identification of alternative strategies
C)The identification of the influence of each strategy on the firm's cost of capital
D)The ranking of the alternative strategies in descending order of NPV value

Question

Quizplus · Accepted Answer

The final step is to rank the alternative strategies in descending order of NPV (Net Present Value) value. This is crucial because it allows the decision-makers to identify the most profitable strategy for the business. The estimation of cash flows generated by the business for the next 10 years and the identification of alternative strategies are important steps in enterprise value analysis, but they do not provide a clear indication of which strategy is the most profitable. The identification of the influence of each strategy on the firm's cost of capital is also important but is usually considered earlier in the analysis.

The Final Step When Applying Enterprise Value Analysis to the Evaluation