Which of the Following Statements Is FALSE

question 19

Multiple Choice

Which of the following statements is FALSE?

• A)If the firm has no debt, then r_wacc equals the risk-free rate of return.
• B)Because the firm's free cash flow is equal to the sum of the free cash flows from the firm's current and future investments, we can interpret the firm's enterprise value as the total net present value (NPV)that the firm will earn from continuing its existing projects and initiating new ones.
• C)The long-run growth rate g_FCF is typically based on the expected long-run growth rate of the firm's revenues.
• D)When using the discounted free cash flow model, we forecast the firm's free cash flow up to some horizon, together with some terminal (continuation)value of the enterprise.

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Definitions:

Inelastic

Refers to a circumstance in which the demand or supply of a product or service is largely unaffected by price fluctuations.

Elastic

Describes a situation in which the demand or supply for a good or service significantly changes in response to price changes.

Cross-Price Elasticity

A measure of how much the demand for a product changes when the price of another product changes.

Quantity Demanded

The specific amount of a good or service that consumers are willing and able to buy at a particular price.