If Two Firms Have the Same Current Dividend and the Same

question 63

True/False

If two firms have the same current dividend and the same expected growth rate, their stocks must sell at the same current price or else the market will not be in equilibrium.

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Definitions:

Direct Method

A method of preparing the cash flow statement where actual cash flows from operating activities are listed, as opposed to the indirect method which adjusts net income for non-cash transactions.

Net Cash Provided

The amount of cash generated through a company's operations, after accounting for outflows and inflows.

Prepaid Expenses

Costs paid for in advance of receiving the benefit, such as insurance or rent, which are recorded as assets initially.

Free Cash Flow

The amount of cash a company generates after accounting for capital expenditures, indicating the ability to repay creditors or pay dividends and interest to investors.