1.Why the CFA Code of Ethics – Section 5 is important in relationship to DCF valuation?...

1.Why the CFA Code of Ethics – Section 5 is important in relationship to DCF valuation?

2.Make a recommendation – aligned with CFA Code of Ethics

Expert Solution

1. CFA code of ethics section 5 is important in relationship of discounted cash flow valuation because it will be related to finding out the discounted cash flow valuation of all the operating assets as well as the non operating Assets of the company separately and then they will be trying to merge these operating asset and non operatingassets discounted cash flows in order to arrive at this discounted cash flows of the company.

Hence section 5 of CFA code of ethics will be advocating calculation of the value of firm after finding out the discounted cash flow valuation of operating asset as well as non operating assets separately and then combining them together.

2. Recommendation to the company should be to use free cash flow to the firm in order to find out the valuation associated with the overall company which has been provided in the CFA code of ethics and it will be helping in finding out the cash flow of a company in adequate manner and it will be also ascertaining future risk related to the future value.

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