Which of the Following Statements Is False

question 72

Multiple Choice

Which of the following statements is false?

• A) In a share repurchase, the firm uses excess cash to buy back its own stock.
• B) The discounted free cash flow model begins by determining the value of the firm's equity.
• C) The discounted free cash flow model focuses on the cash flows to all of the firm's investors, both debt and equity holders, and allows us to avoid estimating the impact of the firm's borrowing decisions on earnings.
• D) In recent years an increasing number of firms have replaced dividend payouts with share repurchases.

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Definitions:

Discount Rate

The interest rate that the Federal Reserve charges commercial banks for loans, influencing the money supply and overall economic growth.

Perpetuity

A financial instrument or investment that pays a fixed amount of money indefinitely without a maturity date.

Preferred Stock

A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock, usually with fixed dividends.

Annual Dividend

The total dividend payment a company makes to its shareholders in a year.