Which of the Following Statements Is FALSE

question 19

Multiple Choice

Which of the following statements is FALSE?

• A) In the method of comparables, we estimate the value of the firm based on the value of other, comparable firms or investments that we expect will generate very similar cash flows in the
• Future.
• B) Consider the case of a new firm that is identical to an existing publicly traded company. If these firms will generate identical cash flows, the Law of One Price implies that we can use the value of the existing company to determine the value of the new firm.
• C) A valuation multiple is a ratio of some measure of the firm's scale to the value of the firm.
• D) Even two firms in the same industry selling the same types of products, while similar in many respects, are likely to be of different size or scale.

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Definitions:

Crop Dusting

The process of distributing pesticides, fertilizers, or seeds over agricultural crops using aircraft.

Blasting

The use of explosives to break rock for excavation purposes or to demolish structures.

Reasonable Person Standard

A legal standard that measures behavior against how a hypothetical, reasonable and prudent person would have acted under similar circumstances.

Mental Deficiency

A term historically used to describe a range of intellectual disabilities, but now often considered outdated and insensitive.