Which of the Following Statements Is FALSE

question 15

Multiple Choice

Which of the following statements is FALSE?

• A)Two firms in the same industry selling the same types of products, while similar in many respects, are likely to be of different size or scale.
• B)Consider the case of a new firm that is identical to an existing publicly traded company. If these firms will generate identical cash flows, the Law of One Price implies that we can use the value of the existing company to determine the value of the new firm.
• C)In the method of comparables, we estimate the value of the firm based on the value of other, comparable firms or investments that we expect will generate very similar cash flows in the future.
• D)A valuation multiple is a ratio of some measure of the firm's scale to the value of the firm.

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Definitions:

GATT

General Agreement on Tariffs and Trade, a multilateral agreement aimed at reducing trade barriers and promoting international trade.

International Trade

The exchange of goods, services, and capital between countries and territories, driven by the principle of comparative advantage.

Joseph Stiglitz

An American economist and a professor at Columbia University, known for his work on income distribution, risk, and globalization. He is a recipient of the Nobel Memorial Prize in Economic Sciences.

Nobel Prize

International awards given annually in several categories (e.g., peace, literature, physics) to recognize significant contributions or achievements.