Reading 43: Free Cash Flow Valuation-LOS e 习题精选

Session 12: Equity Investments: Valuation Models
Reading 43: Free Cash Flow Valuation

LOS e: Discuss approaches for forecasting FCFF and FCFE.

A common approach to forecasting free cash flows is to:

A)	calculate historical free cash flow and apply an expected growth rate.

B)	project net income and expected capital expenditures.

C)	project earnings before interest and taxes (EBIT) and expected capital expenditures.

Historical free cash flows are often used for forecasting.

[此贴子已经被作者于2011-3-21 11:25:46编辑过]

2^#

发表于 2011-3-18 14:55 | 只看该作者

In forecasting free cash flows it is common to assume that investment in working capital:

A)	is greater than fixed capital investment during a growth phase.

B)	will equal fixed capital investment.

C)	will be financed using the target debt ratio.

It is usually assumed that the investment in working capital will be financed consistent with the target debt ratio.

3^#

发表于 2011-3-18 14:56 | 只看该作者

In forecasting free cash flows it is common to assume that:

A)	the firm has no non-cash expenses.

B)	the firm adheres to a target capital structure.

C)	historical and future free cash flow will be the same.

A target debt ratio is usually assumed to remain constant. Historical cash flows are often projected forward with a growth rate.