Which of the following statements is NOT CORRECT?
A. The free cash flow valuation model discounts free cash flows by the required return on equity.
B. The free cash flow valuation model can be used to find the value of a division.
C. An important step in applying the free cash flow valuation model is forecasting the firm's pro forma financial statements.
D. Free cash flows are assumed to grow at a constant rate beyond a specified date in order to find the horizon, or terminal, value.
E. The free cash flow valuation model can be used both for companies that pay dividends and those that do not pay dividends.
Answer: A
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A. Private employment agencies B. Employee referrals C. Newspaper ads D. College recruiters E. Unions
Engagement risk can be eliminated by:
A. lowering materiality. B. establishing policies for client acceptance and continuance. C. lowering audit risk. D. Engagement risk cannot be eliminated.
The term "comprehensive income" as defined by the FASB
a. must be reported on the face of the income statement. b. includes all changes in equity during a period except those resulting from investments by and distributions to owners. c. is the net change in owners' equity for the period. d. is synonymous with the term "net income."
Ordering costs ______.
a. are expressed on a per-order basis b. are proportional to quantity ordered c. depend on quality of products ordered d. are usually higher than holding costs