Question: Which of the following statements about the free c…
Which of the following statements about the free cash flow from the firm (FCFF) approach is true?
- We include the cash necessary to pay short-term liabilities that do not have interest charges associated with them, such as accounts payable and accrued expenses.
- The costs associated with noninterest-bearing current liabilities, which are in the firm’s cost of sales and other operating expenses, are added in the calculation of FCFF.
- The total value of the firm, VF, is computed as the present value of the FCFF, discounted by the firm’s weighted average cost of capital, WACC.