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What is free cash flow to the firm?

  1. A Cash available to all capital providers after operating expenses, taxes and reinvestment
  2. B Net income plus dividends
  3. C Cash held at the bank
  4. D Revenue less cost of goods sold
Answer

Cash available to all capital providers after operating expenses, taxes and reinvestment

FCFF is discounted at WACC to give enterprise value. FCFE is discounted at the cost of equity to give equity value.

All CFA MCQs

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