Valuation Models Use the Relationship Between Share Value,future Cash Flows,and

question 54

Multiple Choice

Valuation models use the relationship between share value,future cash flows,and the cost of capital to estimate these quantities for a given firm.Realistically,for a publicly traded firm,what can we reliably use such models to determine? I.the firm's future cash flows

• A)I only
• B)II only
• C)III only
• D)I and II
• E)II and III only

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Definitions:

Profit

The financial gain achieved when the total revenues generated from business activities exceed the total costs and expenses incurred.

Market Value

The ongoing price for the transaction of assets or services within the marketplace.

Interest Rate

The percentage of a sum of money charged for its use, often expressed as an annual percentage rate.

Net Income

The total profit of a company after all expenses and taxes have been deducted from total revenue.