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:

Amortization

A financial term referring to the gradual reduction of a debt over a period of time by periodic payments of principal and interest.

Acquired Subsidiary

A company that becomes a subsidiary through purchase or takeover by another company.

Consolidated Goodwill

An intangible asset that appears when a parent company acquires a subsidiary and is recorded after consolidation processes.

Acquisition Transaction

An acquisition transaction is a business deal in which one company purchases most or all of another company's shares to take control.