Under the Expected Cash Flow Approach

question 8

Multiple Choice

Under the expected cash flow approach,

• A) the model is best used where the element being measured does not have variable cash flows.
• B) the projected cash flows reflect the certainty in terms of amount and timing.
• C) the discount rate is adjusted to accommodate the riskiness of the cash flows.
• D) the cash flow uncertainty is dealt with by using probabilities.

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Definitions:

Sum of Squared Errors

The total of the squared differences between the observed values and the values predicted by a model or the mean.

Variation

A measure of the spread or dispersion of a set of data points within a dataset.

Null Hypothesis

A default hypothesis that there is no significant effect or difference, and any observed variation is due to chance.

Normally Distributed

Describes a distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean.