CFE 201: Match WACC with the cash flows being discounted
A valuation pairs a cash-flow definition with a compatible discount rate. Unlevered business cash flow and equity cash flow differ because financing is treated differently.
Original practice scenario
Value an original stream of 100 per year using two possible rates, then explain which stream each rate is meant to discount. Include taxes, terminal assumptions and timing. A sensitivity table is useful; mixing a cost-of-equity rate with unlevered cash flow is not.
Study check
Write the assumptions, the decision being supported and one limitation. Use the current course syllabus for the required terminology and scope; this introductory guide is not a complete course summary.
Reading sources
ActNet editorial guide · October 1, 2026 · Original illustrative examples.
0
0 replies