The free cash flow from the firm (FCFF) approach is true

jagguarpaw January 15, 2017 0 Comments

Question: Which of the following statements about the free c…

 

Which of the following statements about the free cash flow from the firm (FCFF) approach is true?

 

  1. We include the cash necessary to pay short-term liabilities that do not have interest charges associated with them, such as accounts payable and accrued expenses.

 

  1. The costs associated with noninterest-bearing current liabilities, which are in the firm’s cost of sales and other operating expenses, are added in the calculation of FCFF.

 

  1. The total value of the firm, VF, is computed as the present value of the FCFF, discounted by the firm’s weighted average cost of capital, WACC.