A Simplified Version of the Discounted Free Cash Flow Valuation

question 35

Multiple Choice

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

• A)start-up companies with stable cash flow patterns.
• B)growth companies with increasing cash flow patterns.
• C)growth companies with stable cash flow patterns.
• D)mature firms with stable cash flow patterns.

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Definitions:

Uniform Density

Refers to a probability distribution where all outcomes are equally likely within a certain range.

Probability

A statistical measure that quantifies the likelihood of a specific event occurring within a set of conditions or experiments.

Normal Model

A statistical model based on the Normal (or Gaussian) distribution, characterized by a symmetrical bell-shaped curve indicating data dispersion.

Presale Testing

An assessment process used by companies to evaluate the viability, market potential, or functionality of a product before it is launched to the public.