Question: a. What does it mean when a companys free cash flow is negative in one or more years? b. Do negative values of free cash

a. What does it mean when a company’s is negative in one or more years?
b. Do negative values of in any way alter or invalidate the notion that a company’s fair market value equals the present value of its free cash flows discounted at the company’s weighted-average cost of capital?
c. Suppose a company’s free cash flows were expected to be negative in all future periods. Can you conceive of any reasons for buying the company’s stock?

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a Negative free cash flow simply means that the company will not be able to fund all worthwhile acti... View full answer

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