Which of the Following Statements Is FALSE

question 2

Multiple Choice

Which of the following statements is FALSE?

• A) If the firm has no debt, then rwacc equals the risk-free rate of return.
• B) When using the discounted free cash flow model, we forecast the firm's free cash flow up to some horizon, together with some terminal (continuation) value of the enterprise.
• C) Because the firm's free cash flow is equal to the sum of the free cash flows from the firm's current and future investments, we can interpret the firm's enterprise value as the total net present value (NPV) that the firm will earn from continuing its existing projects and initiating new ones.
• D) The long-run growth rate gFCF is typically based on the expected long-run growth rate of the firm's revenues.

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Definitions:

Income and Loss Sharing

A method of distributing profits and losses among business partners or investors according to a pre-agreed ratio.

Noncash Assets

Assets that cannot be easily converted into cash, such as property, equipment, and investments.

Liquidated

The process of converting assets into cash or cash equivalents by selling them on the open market.

Personal Assets

Assets owned by an individual, including both tangible items like real estate and cars, and intangible items like investments and patents.