Which of the Following Statements Is NOT CORRECT

question 51

Multiple Choice

Which of the following statements is NOT CORRECT?

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

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Definitions:

Adipose Cells

Cells specialized in storing fat, providing insulation and energy reserves for the body.

Fat

Substance that consists mainly of triglycerides. See saturated fat, unsaturated fat.

Dense Regular Connective Tissue

A type of connective tissue with collagen fibers aligned in parallel, providing high tensile strength in one direction, found in tendons and ligaments.

Tendons

Fibrous connective tissues that attach muscles to bones, transmitting the force created by muscle contraction to the skeleton to enable movement.