Which of the Following Statements Regarding Fundamental and Relative Valuation

question 67

Multiple Choice

Which of the following statements regarding fundamental and relative valuation techniques is true?

• A) Both techniques require an appropriate estimate of the required rate of return and the growth rate.
• B) Both techniques require an estimate of future cash flows and a discount rate.
• C) Both techniques require an estimate of future cash flows and a growth rate.
• D) Both techniques require an estimate of future cash flows, the required rate of return and a growth estimate.
• E) All of the above.

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Definitions:

Marginal Tax Rate

The tax rate that applies to each additional dollar of income earned; the percentage of tax paid on any additional income earned.

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity, which determines its financial leverage.

Pre-tax Cost

The expense associated with a resource or activity before the effect of taxes is considered.

Semi-annually

Occurring twice a year, a term often used in reference to the payment of interest or dividends.