Which of the Following Statements Is FALSE

question 27

Multiple Choice

Which of the following statements is FALSE?

• A) The long-run growth rate g_FCF is typically based on the expected long-run growth rate of a firm's revenues.
• B) Since a firm's free cash flow is equal to the sum of the free cash flows from the firm's current and future investments, we can interpret the firm's enterprise value as the total net present value (NPV) that the firm will earn from continuing its existing projects and initiating new ones.
• C) If a firm has no debt, then r_wacc equals the risk-free rate of return.
• D) When using the discounted free cash flow model, we forecast a firm's free cash flow up to some horizon, together with some terminal (continuation) value of the enterprise.

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Definitions:

Long Run Market Supply Curve

A curve showing the relationship between the price of a good and its supply over a longer period, when all input factors can be varied.

Limited Quantities

A restricted amount of a product or resource available for consumption or use.

Perfectly Elastic

Perfectly elastic describes a situation in market demand where consumers will only buy at one price and any deviation from this price leads to zero demand for the good or service.

Economic Profits

The difference between a firm’s total revenue and its total costs, including both explicit and implicit costs.