Which of the Following Statements Is NOT CORRECT

question 51

Multiple Choice

Which of the following statements is NOT CORRECT?

• A) The corporate valuation model discounts free cash flows by the required return on equity.
• B) The corporate valuation model can be used to find the value of a division.
• C) An important step in applying the corporate valuation model is forecasting the firm's pro forma financial statements.
• D) Free cash flows are assumed to grow at a constant rate beyond a specified date in order to find the horizon, or terminal, value.
• E) The corporate valuation model can be used both for companies that pay dividends and those that do not pay dividends.

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Definitions:

Marginal Product

The additional output a firm gains from employing one additional unit of a factor, such as labor or capital, holding other factors constant.

Labor Intensive

A term used to describe a process or industry that requires a large amount of manual labor relative to capital investment.

Alternative Technologies

Different or new technologies that provide an alternative way of solving problems or completing tasks, often with the aim of improving efficiency or environmental sustainability.

Marginal Product

The extra output, or increase in production, that results from adding one more unit of a specific input, while other inputs are kept constant.