Which of the Following Statements Is NOT CORRECT

question 10

Multiple Choice

Which of the following statements is NOT CORRECT?

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

---

Definitions:

Standard Hours

The expected amount of time required to complete a task or produce a unit of product under normal conditions.

Variable Manufacturing Overhead

Expenses that vary with the level of production output, such as utilities and materials used in manufacturing.

Direct Labor-Hours

The overall hours logged by employees actively involved in the manufacture of a product or the rendering of a service.

Labor Efficiency Variance

A measure used in budgeting and accounting to evaluate the difference between the actual hours worked and the standard hours expected to complete a task.