Answered: When considering the discount rate to…

When considering the discount rate to use for discounting cash flows of an entire company, we can use either the overall WACC or just the cost of one security (e.g., debt). True or False?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter8: Current And Contingent Liabilities

Section: Chapter Questions

Problem 20DQ

See similar textbooks

Related questions

Q: Which of the following method is not based on concept of time value of money? A. Discounted payback…

A: Time value of money is based on the concept, that money you have today worth more than it in the…

Q: The internal rate of return (IRR) is The same thing as the cost of capital. The discount rate that…

A: IRR is the internal rate of return. It is the rate at which net present value is equal to zero.…

Q: Which one of the following is a measure of long term solvency? A. Price earning ratio B. Profit…

A: Solvency refers to a firm's ability to meet its long term financial obligations or debt.

Q: The internal rate of return (IRR) is The same thing as the cost of capital. The discount rate that…

A: Capital budgeting is referred as the process of decision making which is used by companies to…

Q: what are usefulness and weakness of discounted cash flow method?

A: Discounted Cashflow Method is the Method in which we compare Initial Project cost with expected…

Q: How is the impact of uncertainty reflected in a discounted cash flow (DCF) analysis?a) Debt/equity…

A: The objective of the question is to identify how uncertainty is reflected in a discounted cash flow…

Q: True/false Under IFRS, the discount rate should reflect risks for which future cash flow…

A: False Refer step 2 for explanation

Q: Explain discounted cash Dow techniques (DCFs)?

Q: What cash flows are discounted in the FCFE model, and what is the discount rate?

A: FCFE MODEL: FCFR is known as free cash flow to equity or levered free cash flow, it is a model…

Q: Give some examples of Discounted cash flow?

A: Discounted cash flow: It's a time value method to calculate the project or investment value using…

Q: Define DCF (discounted cash flow) analysis

A: Discounting cashflow

Q: Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics,…

A: Number of shares outstanding = 10,000,000 Number of bonds outstanding = 40,000 Current stock price =…

Q: In this method, the company compares the amount spent on the investment with the discounted expected…

A: a. Payback is the period in which the investment can break-even. b. NRV is the difference of…

Q: The APR is a. the average annual percentage cost paid on deposits b. the average rate paid on…

A: The APR is (c) the average rate paid for credit

Q: yback method, the Accounting Rate of Return, and Discounted Cash Flow Model (Ne

A: Step 1 A huge budget is a method through which a company assesses possible substantial projects or…

Q: What is difference between The earnings multiplier and Discounted cash flow model (DCF)? kindly…

A: Valuation is the process of determining fair value of an asset or a firm. There are various methods…

Q: To find NPV, it requires

A: NPV or net present value technique is used to determine the present value of all future cash flows.…

Q: disadvantages

A: Meaning of Discounted Cashflow Analysis Discounted cash flow (DCF) is a valuation method used to…

Q: What are the strenghts and weaknesses of the discount cash flow methods?

A: discounted cash flow methods are used to calculate to find the future cash inflow discount into its…

Q: For Discounted Cash Flows to be useful, individual investors and companies must estimate a discount…

A: Solution: Discounted cash flow technique is the technique used to determine whether a project should…

Q: Based on your understanding of the fAactors that affect the cost of money, Identify which of the…

A: Higher inflation rate would lead to higher interest or nominal rate on the borrowed amount. This is…

Q: Why are the net present value and internal rate of return considered discounted cash flow methods?

A: Net present value is the comparison between the net cash inflows received from a future investment…

Q: A centerpiece of any study of finance is "valuation." A simple function, "V=l/R," can be used to…

A: Valuation is the process of determining the present intrinsic value of an asset or a security.…

Q: What is the essence of the discounted cash flow methods?

Q: The discount rate to be used for calculating the present value of a stream of cash flow should be…

A: Discount rate is defined as rate of the return, which helps in the computation of the future's DCF…

Q: The discounted payback method discounts cash flows at the opportunity cost of capital and then…

A: Cost of capital denotes that cost which a firm is required to pay to finance the amount for the…

Q: What are the strenghts and weaknesses of the Discounted Cash Flow methods

A: Cash flow is the movement of money from a particular investment. Discounted cash flows mean…

Q: How should I think about the discount rate in a discounted cash flow model, and what it means (in…

A: Discount rates are the rates at which cash flows over the estimated time period are discounted.…

Question

When considering the discount rate to use for discounting cash flows of an entire company, we can use either the overall WACC or just the cost of one security (e.g., debt).

True or False?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

What are the strenghts and weaknesses of the discount cash flow methods?
The IRR method assumes that cash flows are reinvested at _________. A. the internal rate of return B. the companys discount rate C. the lower of the companys discount rate or Internal rate of return D. an average of the internal rate of return and the discount rate
What cash flows are discounted in the FCFE model, and what is the discount rate?
What are: the payback method, the Accounting Rate of Return, and Discounted Cash Flow Model (Net Present Value and Internal Rate of Return)
What is difference between The earnings multiplier and Discounted cash flow model (DCF)? kindly explain in detail
How is the impact of uncertainty reflected in a discounted cash flow (DCF) analysis?a) Debt/equity mixb) Discount ratec) Income tax rated) Interest coverage ratio
A centerpiece of any study of finance is "valuation." A simple function, "V=l/R," can be used to describe an asset's "value." What does the "R" in that expression stand for? O a future cash flow O a current cash flow O a market-determined discount rate O a variable income measure O a measure of probability
Give some examples of Discounted cash flow?
What are the discounted cash flow techniques?
How should I think about the discount rate in a discounted cash flow model, and what it means (in real life)? And where do I find inputs for the discount rate? How is it calculated?
3. Describe the Discounted Cash Flow Method. How is this value determined, and what are the assumptions/limitations?
What is the essence of the discounted cash flow methods?