b. Do negative values of free cash flow in way alter or invalidate the notion that a company's fair market value equals the present value of its free cash flows discounted at the company’s weighted average cost of capital? Suppose a company's free cash flows were expected to be negative in all future periods. Can you conceive of any reasons for buying the company's stock?

Free cash flow (FCF) is a cash flow available for distribution among all the security holders of a company. When free cash flow is negative; it could be a sign that a company is using up more cash to finance investments. If these investments earn a high return, the strategy has the potential to pay off in the long run.

c) Even though a company’s free cash flow were expected to be negative in all future periods, the company’s stock can be purchased for other objective rather than profit. These are; to prevent being at the mercy of foreign supplier of an integral component of production; to gain control or prevent hostile take over; for social value and patriotism, and partnership.

Negative values of free cash flow can certainly affect the notion that a company's fair market value equals the present value of its free cash flows discounted at the company's weighted average cost of capital (WACC). This is because the concept behind valuing a company based on its free cash flows assumes that the company generates positive cash flows that can be discounted. Negative free cash flows imply that the company is losing money rather than generating positive cash flows.

If a company's free cash flows were expected to be negative in all future periods, it becomes challenging to justify buying the company's stock. However, there might be a few reasons a potential investor would consider purchasing the company's stock:

1. Turnaround potential: Despite the negative free cash flows, the investor might believe that the company has the potential to reverse its situation and start generating positive cash flows in the future. They may see the current negative cash flows as temporary and expect the company's financial performance to improve.

2. Asset value: The investor may believe that the company's assets, such as intellectual property, real estate, or brand value, have a higher value than what the market currently reflects. They may perceive an opportunity to acquire the company at a lower valuation and profit in the long term when the market recognizes the true value of its assets.

3. Strategic acquisition: Another reason to buy a company with negative free cash flows could be for strategic purposes. The investor might be interested in acquiring the company to gain access to its customer base, technology, or market share. The negative cash flows may be seen as a temporary setback that can be resolved by integrating the company into a larger entity or implementing strategic changes.

It is important to note that investing in a company with negative free cash flows carries higher risk, and thorough analysis should be performed to assess the likelihood of a turnaround or the true value of the company's assets.

To answer this question, we need to understand the concept of free cash flow (FCF), its role in determining a company's fair market value, and the impact of negative FCF on this valuation. Let's break it down step by step:

1. Free Cash Flow (FCF):
Free cash flow is a measure of the cash a company generates after accounting for its operational and capital expenditure needs. It represents the cash available for distribution to investors, including shareholders and debt holders. FCF is a critical metric in valuing a company because it indicates its ability to generate cash and sustain its operations.

2. Fair Market Value and Discounted Cash Flow (DCF) Analysis:
The fair market value of a company is the price at which it would sell in a competitive market. One common approach to estimate fair market value is through discounted cash flow (DCF) analysis. DCF involves calculating the present value of a company's projected future cash flows. The premise is that the value of cash flows received in the future is worth less than the same amount received today, due to the time value of money.

3. Negative Free Cash Flow and Fair Market Value:
In traditional DCF analysis, negative FCF in one or more periods can certainly impact a company's fair market value. The negative FCF implies that the company is not generating sufficient cash internally to cover its operational and investment needs and may require additional financing or face financial distress.

4. Impact of Negative FCF on Valuation:
Negative FCF can reduce the fair market value of a company when it implies a prolonged period of financial difficulty. Investors may be pessimistic about the company's viability and future cash flow generation, leading to a lower valuation. However, negative FCF in the near term does not necessarily invalidate the concept that fair market value equals the present value of free cash flows. Rather, it highlights the risks and uncertainties associated with the company's cash flow prospects.

5. Reasons for Buying Stock with Negative FCF:
While negative FCF generally raises concerns for investors, there can be situations where buying a company's stock with negative FCF might still make sense:

a) Turnaround Potential: If the negative FCF is temporary and there are viable plans or strategies in place to improve the company's cash flow position, investors with a long-term perspective might see an opportunity for potential future gains.

b) Undervaluation: If the stock price already reflects the negative FCF and market sentiment is overly pessimistic, there may be an opportunity for contrarian investors to buy the stock at a discounted price, betting on a potential recovery in the future.

c) Unique Assets or Intellectual Property: If the company possesses unique assets or valuable intellectual property, investors might be motivated by the potential for future monetization or licensing opportunities, despite the current negative FCF.

In any case, investing in a company with negative FCF requires thorough analysis, careful consideration of risks, and an understanding of the specific reasons and potential catalysts that could lead to future positive cash flow generation.