A Simplified Version of the Discounted Free Cash Flow Valuation

question 142

True/False

A simplified version of the discounted free cash flow valuation model assumes a zero-growth perpetuity for future cash flows.This assumption is best applied to growth companies with stable cash flow patterns.

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Definitions:

Net Investment Cost

The total cost associated with making an investment after subtracting any incentives or credits.

Tax Rate

The percentage at which an individual or corporation is taxed by the government on the income or profits generated.

CCA Method

The CCA (Capital Cost Allowance) method is a tax deduction approach allowing Canadian businesses to claim depreciation on tangible property over its useful life as part of calculating taxable income.

CCA Tax Shield

A deduction that allows businesses to depreciate the cost of capital assets over time against their taxable income, reducing the tax payable.