If You Want to Value a Firm but Do Not

question 69

Multiple Choice

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

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

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Definitions:

Capital In Excess

Funds received by a company from issuing shares that exceed the par value of the shares.

Debt-Equity Ratio

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets, often used to assess the company's financial leverage.

Residual Dividend Policy

A strategy where dividends paid to shareholders are based on earnings left over after all operational and investment costs are covered.

After-Tax Earnings

The net income of a company after all taxes have been deducted from revenues.