Which of the Following Statements About Valuing a Firm Using

question 3

Multiple Choice

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

• A) The horizon value is calculated by discounting the free cash flows beyond the horizon date and any tax savings at the levered cost of equity.
• B) The horizon value is calculated by discounting the free cash flows beyond the horizon date and any tax savings at the cost of debt.
• C) The horizon value is calculated by discounting the expected earnings at the WACC.
• D) The horizon value is calculated by discounting the free cash flows beyond the horizon date and any tax savings at the WACC.
• E) The horizon value must always be more than 20 years in the future.

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Definitions:

ESOPs

Employee Stock Ownership Plans, a program that provides a company's workforce with an ownership interest in the company.

Significant Risk

The potential for a substantial negative outcome, affecting health, safety, or the environment.

Shareholders Votes

The rights of shareholders to vote on corporate matters, such as electing directors or approving policies, typically based on the number of shares they own.

Trust Holdings

Assets held in a trust by one party for the benefit of another, including real estate, stocks, bonds, and other investments.