Which financial valuation approach values a firm by discounting its future expected free cash flows at the Weighted Average Cost of Capital (WACC)?
ADividend Discount Model
BRelative Valuation Model
CDiscounted Cash Flow (DCF) Model
DBook Value Method
Explanation
* The DCF Model values a firm by discounting projected Free Cash Flows to Firm (FCFF) using WACC.
* Present Value calculation sums discounted FCFF plus discounted Terminal Value.
* Represents a fundamental intrinsic valuation methodology.
Exam Relevance
- Topic: Corporate Finance
- Subtopic: Firm Valuation
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