Which of the Following Statements Is FALSE

question 35

Multiple Choice

Which of the following statements is FALSE?

• A)The more cash the firm uses to repurchase shares,the less it has available to pay dividends.
• B)Free cash flow measures the cash generated by the firm after payments to debt or equity holders are considered.
• C)We estimate a firm's current enterprise value by computing the present value (PV)of the firm's free cash flow.
• D)We can interpret the enterprise value as the net cost of acquiring the firm's equity,taking its cash,and paying off all debts.

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Definitions:

Fixed Manufacturing Overhead

Regular, unchanged costs incurred during the manufacturing process, regardless of production volume, such as salaries of permanent staff and rent.

Financial Advantage

The benefit gained in monetary terms from a certain business activity or financial decision.

Fixed Manufacturing Overhead

Costs that do not vary with the level of production, such as rent, insurance, and salaries for managers.

Contribution Margin

What’s left of the sales proceeds once variable expenditures are taken out.