In Theory,all Three Valuation Models,when Correctly Implemented with Internally Consistent

question 48

Multiple Choice

In theory,all three valuation models,when correctly implemented with internally consistent assumptions,will produce the same estimates of value.However,in practice,which of the following errors can result in different value estimates?

• A) incomplete or inconsistent earnings and cash flow forecasts.
• B) inconsistent estimates of weighted average costs of capital.
• C) incorrect continuing value computations.
• D) All of these errors result in different value estimates.

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Definitions:

Resource Use

The consumption or exploitation of natural resources by humans for manufacturing, energy production, and other economic activities.

Real Rate

The interest rate that has been adjusted to remove the effects of inflation, reflecting the true cost of borrowing.

Nominal Rate

The interest rate before adjustments for inflation, often referred to in the context of loans and savings.

Rate Of Inflation

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.