Which of the Following Statements Is False

question 87

Multiple Choice

Which of the following statements is false?

• A) To estimate a firm's enterprise value, we compute the present value of the free cash flows (FCF) that the firm has available to pay equity holders.
• B) The NPV of any individual project represents its contribution to the firm's enterprise value.
• C) When using the total payout model, we discount total dividends and share repurchases, and use the growth rate in earnings when forecasting the growth of the firm's payout.
• D) In the total payout model, we first value the firm's equity, rather than just a single share.

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Definitions:

Multiple IRRs

A phenomenon that occurs when there is more than one internal rate of return for a project due to changing cash flow signs over the project's lifetime.

Discounted Cash Flow

An appraisal technique that calculates the worth of an investment by forecasting its future cash inflows and adjusting for the time value of money.

Non-Discounted Cash Flow

Cash flows that are not adjusted for the time value of money, representing raw incoming or outgoing cash streams.

Mutually Exclusive

Situations or events that cannot occur at the same time, implying a choice between alternatives.