Which of the Following Is False

question 15

Multiple Choice

Which of the following is false?

• A)If we expect the firm to earn a constant cash flow, C, then the stock's price (P) will be equal to C/d where d is the discount factor.
• B)There are often divergent opinions about the future expected cash flows of a stock.
• C)Assuming we can estimate the expected cash flow (C) and the discount factor (d), we can solve for the current value of a share of the stock.
• D)The stock's price will always converge to a value based on a universally held expected value.

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Definitions:

Interest Rate

The percentage of a sum of money charged for its use, typically expressed as an annual percentage rate.

Capacity Alternatives

Different strategies or options available to an organization to adjust or increase its production or service capacity to meet variations in demand.

Market Acceptance

The degree to which a new product or service is accepted and purchased by customers in the market.

Variable Cost

Expenses that vary directly with the level of production or sales volume, such as raw materials and direct labor costs.