A discount rate used in a DCF valuation is often an estimate of what for the business?
AIts dividend payout ratio
BIts book value per share
CIts cost of capital
DIts inventory turnover
Answer & Solution
Correct answer: C. Its cost of capital
In DCF valuations the discount rate, often the cost of capital, converts projected cash flows into net present value.
Keep practising Business Valuation
Browse all Business Valuation questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
How is marketability of a business interest defined?A controlling interest is defined as an investor acquiring more than what share of a compaWhich level of value is lowest for equity interests in a private firm?A buyer pays a 100% control premium over the minority price. What is the implied minority A private firm valued using listed-peer multiples is usually adjusted for what?In the guideline public company method, the comparison with listed firms is expressed as wWhy is the asset-based approach weak for a going concern?Why do some critics doubt the objectivity of the WACC method?