In your own words in as much detail as is needed to show full comprehension, describe...

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In your own words in as much detail as is needed to show full comprehension, describe (1) the components of Equation / below

business finance

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Answer 1

Answer #1

various components:

1. WACC = WEIGHTED AVERAGE COST OF CAPITAL.

It's the overall cost of raising funds for the firm. It is summation of the weighted average cost of capital of equity, preference, debt and retained earnings.

2. Free Cash Flow(FCF)= It is the cash flow generated by the business, which is available for distribution among shareholders of the company.

FCF = CASH FLOW FROM OPERATION- CAPITAL EXPENDITURE.

3. t= 1 to n represents the time period from year 1 to year n.

Purpose:
Under the FCF technique for equity valuation:
This equation is used to find out the value of the firm.

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Answer 2

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