Which of the following factors is a driver of value for a firm? you can choose...

Which of the following factors is a driver of value for a firm? you can choose more than one answer.

	a.	Operating cash flows
	b.	Free Cash Flows
	c.	Weighted Average Cost of Capital
	d.	Net profit
	e.	Revenues

Expert Solution

Following are the factors is a driver of value of firm.

a. Operating cash flows

b. Free Cash flows

C. Weighted Average Cost of Capital

Value of means which showing the firm's, companies, enterprises values economically. To purchase a firm it shows it's book value ot market value of capitalization. Total market capitalization is basically calculated to show the copany's values by calculating it's assets and liabilities. The other way to calculate companies value is determining present value of operating free cash flows. We need cash flows to to discount the value to present values as multiple factor involded in it taxation, depreciating the assets, working capital and earnings before interes and tax.

Weighted average cost of Capital (WACC) is the firm's cost of capital equaling to its weighted average value of sources of capital like stocks, bonds and other longterm debts.

As values of firms depends on its present cash flows returning from its equities and debts we can conclude the factors operating cash flows, free Cash flows and weighted average cost of capital helps to drive value of firm.

jeff jeffy answered 1 year ago

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