Final answer:
Estimating enterprise value involves considering free cash flows to all stakeholders and using the weighted average cost of capital for discounting. This reflects potential capital gains and dividends, encompassing a complete financial view for investors.
Step-by-step explanation:
The aspect that best describes estimating the enterprise value of an entity to a debt/equity team is considering free cash flows to all stakeholders and discounting with an entity's weighted average cost of capital. This approach takes into account the expected cash flows that would be available to all providers of capital (both debt and equity holders), and discounts those flows at the entity's cost of capital, which reflects the weighted average of the cost of debt and the cost of equity. This method allows for the inclusion of potential capital gains from the future sale of the stock and dividends that might be paid, thereby representing the complete financial picture to the investors.
The concept of present discounted value, which is integral to this process, highlights the importance of factoring in the time value of money. The weighting of different capital sources in the WACC also mirrors real-world uncertainties and differing opinions about the future risks and benefits associated with an investment. Applying this principle helps in arriving at an informed valuation of the enterprise.