easy · Principles of Finance cost-of-capital-structure
Which of the following describes the key difference between Free Cash Flow to the Firm (FCFF) and Free Cash Flow to Equity (FCFE)?
- FCFF uses the cost of equity as a discount rate, while FCFE uses the WACC.
- FCFF is independent of capital structure, while FCFE includes debt service and net borrowing.
- There is no difference if the firm has no taxes.
- FCFF includes dividends paid, while FCFE excludes them.
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