Which of the Following Statements Is NOT CORRECT

question 18

Multiple Choice

Which of the following statements is NOT CORRECT?

• A) the free cash flow valuation model discounts free cash flows by the required return on equity.
• B) the free cash flow valuation model can be used to find the value of a division.
• C) an important step in applying the free cash flow valuation model is forecasting the firm's pro forma financial statements.
• D) free cash flows are assumed to grow at a constant rate beyond a specified date in order to find the horizon, or terminal, value.
• E) the free cash flow valuation model can be used both for companies that pay dividends and those that do not pay dividends.

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Definitions:

Primary Processes

The core activities that directly contribute to the production of goods or provision of services in an organization, such as manufacturing, assembly, and service delivery.

Value Chain

A series of activities carried out by a company to deliver a valuable product or service to the market.

Upstream Costs

Expenses incurred in the early stages of a product's lifecycle, typically including exploration and development costs.

Downstream Costs

Expenses incurred later in the production process or in relation to post-production activities.