Estimates of a Stock's Intrinsic Value Calculated with the Free

question 17

Multiple Choice

Estimates of a stock's intrinsic value calculated with the free cash flow methodology depends most critically on _______.

• A) the terminal value used
• B) whether one uses FCFF or FCFE
• C) the time period used to estimate the cash flows
• D) whether the firm is currently paying dividends

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Definitions:

Form 1120

A tax form used by corporations in the United States to report their income, gains, losses, deductions, and credits to the IRS.

Fiscal Year

A fiscal year is a 12-month period used for accounting purposes and preparing financial statements, not always coinciding with the calendar year.

FMV

Fair Market Value, the price at which property would sell on the open market between a willing buyer and seller.

Basis

The amount of investment in property for tax purposes, used to calculate the gain or loss on the sale, exchange, or disposition of property.