CIMA F3 Question Answer
A company financed by equity and debt can be valued by discounting:
free cash flow before interest at WACC.
free cash flow before interest at the cost of equity.
free cash flow after interest at WACC.
free cash flow after interest at the cost of equity.
A company financed by both equity and debt (the whole firm) is valued using free cash flow to the firm (before interest) discounted at the WACC.
So the correct combination is:
Free cash flow before interest at WACC → A.
The other options mismatch cash flow type and discount rate (either equity-only or post-interest flows).
TESTED 13 Feb 2026
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