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(CO G) A favorite method of business valuation is the use of free cash flows. With...

(CO G) A favorite method of business valuation is the use of free cash flows. With this approach, free cash flows are discounted to their present value. A major challenge with this method is

it is hard to determine the correct discount factor.

there is not a consensus on the definition of free cash flows.

cash flows are not as good a predictor of value as reported net income.

the Fed keeps changing the discount rate.

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Answer #1

Solution:

A major challenge with the use of free cash flows is that "there is not a consensus on the definition of free cash flows".

Hence second option is correct.

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