Which of the Following Statements Is False

question 10

Multiple Choice

Which of the following statements is false?

• A) The project's free cash flow to equity shows the expected amount of additional cash the firm will have available to pay dividends (or conduct share repurchases) each year.
• B) The value of the project's FCFE should be identical to the NPV computed using the WACC and APV methods.
• C) The value of the project's FCFE represents the gain to shareholders from the project.
• D) Because interest payments are deducted before taxes, we adjust the firm's FCF by their before-tax cost.

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Definitions:

Standard Deviation

A statistical index that measures how much data values deviate from each other within a dataset.

Beta Coefficient

A measure of a stock's volatility in relation to the overall market; a higher beta indicates greater volatility.

Portfolio

A range of investments held by a person or organization, diversified across asset classes, instruments, or sectors, to manage risk and return.

CAPM

Capital Asset Pricing Model; a model that describes the relationship between systematic risk and expected return for assets, particularly stocks.