Question #37
Reading: Reading 21 Free Cash Flow Valuation
PDF File: Reading 21 Free Cash Flow Valuation.pdf
Page: 16
Status: Incorrect
Correct Answer: A
Your Answer: B
Question
Which of the following is least likely to change as the firm changes leverage?
Answer Choices:
A. Free cash flows to firm (FCFF)
B. Free cash flows to equity (FCFE)
C. Weighted average cost of capital (WACC)
Explanation
The FCFFs are normally unaffected by the changes in leverage, as these are the cash flows
before the debt payments.