If You Want to Value a Firm but Don't Want

question 84

Multiple Choice

If you want to value a firm but don't want to explicitly forecast its dividends,share repurchases,or its use of debt,what is the simplest model for you to use?

• A)Discounted free cash flow model
• B)Dividend discount model
• C)Enterprise value model
• D)Total payout model

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Definitions:

Strike Price

The price at which an optioned stock can be bought or sold. Also called the exercise price or striking price.

Intrinsic Value

The actual worth of an asset, determined through fundamental analysis without regard to its market value.

Dividends

Corporate disbursements to its owners, usually representing a portion of the profits.

Prevailing Market Price

The current price at which a particular security, commodity, or asset can be bought or sold in the marketplace.