The Shares of the Economic Value of a Particular Transaction

question 47

Multiple Choice

The shares of the economic value of a particular transaction that accrues to the seller and the buyer depend on:

• A)the buyer's opportunity cost.
• B)the relative bargaining powers of the two parties.
• C)the cost of production incurred by the seller while producing the good.
• D)the lobbying techniques adopted by the two parties.

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Definitions:

Required Return

The minimum expected return an investor demands for investing in a particular asset, considering its risk.

Per Share FCFE

The amount of Free Cash Flow to Equity available per share of a company's stock, indicating the dividend-paying ability and financial health of the company.

Required Rate of Return

The smallest percentage of yearly earnings from an investment necessary to attract individuals or businesses to invest in a certain security or project.

FCFF Valuation Model

The FCFF Valuation Model estimates a company's value by using its Free Cash Flow to the Firm (FCFF), discounting the cash flows to their present value using the weighted average cost of capital.