When Consistent Assumptions Are Used,we

question 31

Multiple Choice

When consistent assumptions are used,we

• A)get the same value for equity under the enterprise and equity methods of valuation
• B)we get a higher value of equity under the equity method of valuation
• C)we get a lower value of equity under the equity method of valuation
• D)we get equity values that cannot be compared across the equity and enterprise methods of valuation

---

Definitions:

Unsystematic Risk

The risk associated with an individual asset or investment, distinct from market-wide risks.

Risk-free Rate of Return

The theoretical return on an investment with zero risk, typically based on government bonds.

Time Value

The idea that having money presently is more valuable than possessing an identical sum later on because of its capacity to generate earnings.

Systematic Risk

The risk inherent to the entire market or market segment, also known as market risk, which cannot be mitigated through diversification.