Which of the Following Statements Is CORRECT

question 13

Multiple Choice

Which of the following statements is CORRECT?

• A) Two firms with the same expected free cash flows and growth rates must also have the same value of operations.
• B) It is appropriate to use the constant growth model to estimate a stock's value even if its growth rate is never expected to become constant.
• C) If a company has a weighted average cost of capital WACC = 12%, and if its free cash flows are expected to grow at a constant rate of 5%, this implies that the stock's dividend yield is also 5%.
• D) The value of operations is the present value of all expected future free cash flows, discounted at the free cash flow growth rate.
• E) The constant growth model takes into consideration the capital gains investors expect to earn on a stock.

---

Definitions:

Accompanying Figure

An illustrative diagram or chart that is provided to complement or detail the information described in text.

Local Variables

Local variables are variables defined within a method or block, accessible only within that method or block.

Method First

This term is unclear without context; however, it might refer to the prioritization or initial use of a method in programming or software development.

Accompanying Figure

Refers to a diagram or illustration provided alongside textual material to aid understanding or add information.