Session 12: Equity Investments: Valuation Models
Reading 41: Free Cash Flow Valuation
LOS l: Explain how sensitivity analysis can be used in FCFF and FCFE valuations.
A firm has:
- Free cash flow to equity = $4.0 million.
- Cost of equity = 12%.
- Long-term expected growth rate = 5%.
- Value of equity per share = $57.14 per share.
What will happen to the value of the firm if free cash flow to equity decreases to $3.2 million?> >
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A) |
There is insufficient information to tell. | |
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B) |
The value will decrease. | |
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C) |
The value will increase. | |
Everything else being constant, a decrease in free cash flow to equity should decrease the value of the firm. | 
发表于 2010-4-19 14:25
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