Discounting Cash Flows and Earnings. Under the residual income approach and the discounted cash flow approach to firm valuation, carnings


Discounting Cash Flows and Earnings. Under the residual income approach and the discounted cash flow approach to firm valuation, carnings 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 camings and cash flows. Why is the cost of debt inappropriate to use to discount a firm’s earnings or cash flows


Leave a Reply

Your email address will not be published.