Which of the Following Statements Concerning the Valuation of Firms

question 41

Multiple Choice

Which of the following statements concerning the valuation of firms using the method of comparables is FALSE?

• A) If two different firms generate identical cash flows, the Law of One Price will imply that both firms have the same value.
• B) Comparables adjust for scale differences when valuing similar firms.
• C) Valuation multiples take into account differences in the risk and future growth between the firms being compared.
• D) Two firms that sell very similar products or offer very similar services will have different values if they are of different sizes.

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Definitions:

Phallic Stage

A phase in Freudian psychosexual development during which a child's focus of pleasure is on the genital area.

Binge Eating

Consuming large amounts of food in a short time period, often accompanied by feelings of loss of control.

Oral Stage

Freud's first psychosexual development stage, where an infant's pleasure centers are located in the mouth.

Chain-Smokes

The habit of smoking cigarettes successively, lighting each one from the stub of the last.