Explain the term present value of the firm’s operations, Financial Management

Explain the term “present value of the firm’s operations” (also known as Enterprise Value).  What does this number represent?

The present value of the free cash flows of the company denotes the market value of the firm’s core income generating operations. In the world of finance and investing this is occasionally known as the firm’s Enterprise Value.  It is not the total market value of the whole company, though, or the total market value of the company’s assets, since the current, or non-operating assets of the company have not yet been accounted for.

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