Which of the Following Statements About Valuing a Firm Using

question 36

Multiple Choice

Which of the following statements about valuing a firm using the APV approach is most CORRECT?

• A) The value of equity is calculated by discounting the horizon value, the tax shields, and the free cash flows at the cost of equity.
• B) The value of operations is calculated by discounting the horizon value, the tax shields, and the free cash flows before the horizon date at the unlevered cost of equity.
• C) The value of equity is calculated by discounting the horizon value and the free cash flows at the cost of equity.
• D) The APV approach stands for the accounting pre-valuation approach.
• E) The value of operations is calculated by discounting the horizon value, the tax shields, and the free cash flows at the cost of equity.

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Definitions:

Foreign Exchange Gain

A profit arising from the increase in value of one currency against another.

Exchange Rates

The rate at which one currency can be exchanged for another, which can fluctuate based on market conditions.

Present Value

Present Value is the current worth of a future sum of money or stream of cash flows given a specified rate of return, discounting future cash flows to the present.