Which of the Following Is Not True About the Constant

question 67

Multiple Choice

Which of the following is not true about the constant growth valuation model?

• A) The firm's free cash flow is assumed to be unchanged in perpetuity
• B) The firm's free cash flow is assumed to grow at a constant rate in perpetuity
• C) Free cash flow is discounted by the difference between the appropriate discount rate and the expected growth rate of cash flow.
• D) The constant growth model is sometimes referred to as the Gordon Growth Model.
• E) If the analyst were using free cash flow to the firm, cash flow would be discounted by the firm's cost of capital less the expected growth rate in cash flow.

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