Which of the following is NOT a step in valuation using the flow to equity method? A)Determine the equity cost of capital,r_E. B)Compute the equity value,E,by discounting the free cash flow to equity using the Equity cost of capital. C)Determine the free cash flow to equity of the investment. D)Determine the before-tax cost of capital,r_U.

Question

Quizplus · Accepted Answer

In the flow to equity method, the before-tax cost of capital is not a step in the valuation process. The correct steps are to determine the free cash flow to equity, determine the equity cost of capital, and then compute the equity value by discounting the free cash flow to equity using the equity cost of capital.

Which of the Following Is NOT a Step in Valuation