What Is the Major Difficulty with Using Discounted Cash Flow

question 36

Multiple Choice

What is the major difficulty with using discounted cash flow approaches to estimate a stock’s intrinsic value?

• A) Prices in the stock market move from moment to moment.
• B) Small changes to the assumptions of k or g result in major changes in the estimated value.
• C) It is extremely unlikely that a stream of cash flows will continue to grow at the same rate.
• D) The relative valuation techniques are more accurate approaches.

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