Transcribed Image Text
The essence of chapter 7 (Birgham 2020) and establishing the valueof a stock is that company has the ability to generate free cashflow, or it has the potential to generate free cash flow in thefuture. With that assumption, the level of free cash and the speedof the growth of the free cash flow is the primary driver of thecompany's stock valuation . The question at hand is if you believethis evaluation method explains the rise and the fall of a stockprice? (Of course, as you provide a response, it must be supportedby supporting research, either from your assigned readings,external material, articles, current events, financial news and soon). Can you give examples? What about those companies that seetheir stock prices go higher despite lack of free cash flow orregardless of their free cash flow assumptions? What explains theirrise in price? And finally, what is the connection of interestrates to free cash flow? Why do stock market valuations getimpacted by the impact of interest rates on free cash flow? (Ofcourse, this last portion is a very relevant topic in our currentenvironment as interest rates have been veryvolatile).