Under the residual income approach and the discounted cash flow approach to firm valuation, earnings and cash
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Under the residual income approach and the discounted cash flow approach to firm valuation, earnings and cash flows, respectively, are discounted using a firm’s cost of equity. Discuss why the cost of equity is the appropriate discount rate to use to discount a firm’s earnings and cash flows. Why is the cost of debt inappropriate to use to discount a firm’s earnings or cash flows?
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Related Book For
Financial Accounting For Executives And MBAs
ISBN: 9781618531988
4th Edition
Authors: Wallace, Simko, Ferris
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