If You Want to Value a Firm but Don't Want

question 84

Multiple Choice

If you want to value a firm but don't want to explicitly forecast its dividends,share repurchases,or its use of debt,what is the simplest model for you to use?

• A)Discounted free cash flow model
• B)Dividend discount model
• C)Enterprise value model
• D)Total payout model

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Definitions:

Insolvent Company

A company that is unable to pay its debts as they come due, or whose liabilities exceed its assets in value.

Unsecured Liabilities

Debts or obligations that do not have specific assets pledged as collateral in case of default.

Federal Income Taxes

Taxes levied by the national government on annual income earned by individuals, corporations, trusts, and other legal entities.

Bankruptcy

A legal proceeding involving a person or business that is unable to repay outstanding debts.