If You Want to Value a Firm but Do Not

question 36

Multiple Choice

If you want to value a firm but do not want to explicitly forecast its dividends, what is the simplest model for you to use?

• A) the dividend-discount model
• B) the discounted free cash flow model
• C) the enterprise value model
• D) None of the above models can be used if you do not want to forecast dividends or use of debt.

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Definitions:

Time

A dimension in which events can be ordered from the past through the present into the future.

Contribution Margin

The amount by which a product's sales price exceeds its variable costs, contributing towards covering fixed costs and generating profit.

Financial Break-even

The point at which total revenues equal total costs, resulting in no profit or loss for the business.

Financial Break-even

The point at which total revenues are equal to total operating expenses and financial costs, meaning the company makes no profit but also incurs no loss.