Why does growth in debt need to be added as a cash flow to equity before valuing equity (by discounting CFe using (r-g) ? This is reference to Prof. Damodaran's (NYU Stern) Valuation class Weekly challenge 1.

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anonymous · Answer

its bcoz any cash which is not coming from the pocket of the stockholders but being used for the company's projects to earn the excess return for the stockholders should be counted." objective of the firm is to increase the firm value and increase the stock prices."("corporate finance-chap2")