Statement 3 is the answer. But Statement 3 says we should use required return on equity in both the cases (FCFF or FCFE).
How is this possible? We use Re for FCFE and Kc for FCFF.
Please someone explain.
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Please clarify your doubt.
And further, statement 3 is incorrect and it is not the answer. FCFF is discounted at Kc and FCFE is discounted at Ke.
Right. That’s the problem. Institute has given statement 3 as answer.
Institute has given statement 2 as answer
Oh! Sorry. Thanks for the clarification.
Wrong reading by me. Thank you again.