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Management Studies

Q. Free cash-flow valuations?

Earnings create dividends for shareholders. In theory the value of a company is the value of the company's future earnings, discounted at a rate, which reflects the risk of these earnings. A cost of capital is a minimum rate of return that a company must earn in order to satisfy investors for their capital invested. The cost of equity and debt would be considered when working out a cost of capital. A discount rate using the companies cost of capital can be used to derive a value (the present value) of a company's future cash flows and therefore value the company.

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Strategic Management, Management Studies

Category:- Strategic Management
Reference No.:- M9576478

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