If You Want to Value a Firm That Has Consistent

question 65

Multiple Choice

If you want to value a firm that has consistent earnings growth,but varies how it pays out these earnings to shareholders between dividends and repurchases,the simplest model for you to use is the:

• A)enterprise value model.
• B)dividend-discount model.
• C)total payout model.
• D)discounted free cash flow model.
• E)net present value model.

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Definitions:

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance, providing stability in a budget.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to covering fixed costs and profit generation.

Fixed Costs

Expenses that do not vary with the level of production or sales, such as rent, salaries, and insurance.