The Discounted Cash Flow (DCF) Method of Valuation Uses the Discounted

question 106

Multiple Choice

The discounted cash flow (DCF) method of valuation uses the discounted present value of cash flow so it is not subject to the bias of different:

• A) Discount rates.
• B) Internal rates of return.
• C) Monetary systems.
• D) Accounting policies for determining total assets and net income.

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Definitions:

Long-Run Average Total Cost

The cost per unit of output incurred when all factors of production are variable, and scale of production can be changed.

Output

The amount of products or services produced by a company, industry, or economic system.

Total Fixed Cost

The sum of all costs that do not change with output level, including rent, salaries, and insurance.

Short Run

A period in economic analysis during which at least one input, such as plant size or capital, is fixed, limiting the ability to adjust to demand changes.