Which of the Following Statements Is FALSE

question 2

Multiple Choice

Which of the following statements is FALSE?

• A) Even two firms in the same industry selling the same types of products, while similar in many respects, are likely to be of different size or scale.
• B) In the method of comparables, we estimate the value of a firm based on the value of other, comparable firms or investments that we expect will generate very similar cash flows in the future.
• C) Consider the case of a new firm that is identical to an existing publicly traded company. If these firms will generate identical cash flows, the Law of One Price implies that we can use the value of the existing company to determine the value of the new firm.
• D) A valuation multiple is a ratio of some measure of a firm's scale to the value of the firm.

---

Definitions:

Validity

The extent to which a concept, conclusion or measurement is well-founded and likely corresponds accurately to the real world.

Debrief

The process of providing a detailed and explanatory feedback or information following a task, experiment, or event.

Psychological Information

Data related to the mental processes, behaviors, and emotional state of an individual.

Causal Conclusions

Judgments about the existence or strength of a cause-and-effect relationship between two variables.