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Write 2 page paper in which you respond to the question below and provide true/ false...

Write 2 page paper in which you respond to the question below and provide true/ false replies for all questions (with supporting rationale) and additional requested information, with references.

1b. True/ False - A discounted cash flow valuation of a target company discounts the target's estimated free cash flows at the acquirer's cost of capital

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Answer #1

The statement is FALSE

A discounted cash flow valuation of a Targer company discount's the target's estimated free cash flows at the Target's cost of capital.

The basic principle is that the discount rate should reflect the risk of cash flows discounted. So targets cost of capital is used.

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