Which of the Following Is the Appropriate Way to Calculate

question 23

Multiple Choice

Which of the following is the appropriate way to calculate the price of a share of a given company using the free cash flow valuation model?

• A) P0 = Div1/(rE - g)
• B) P0 = PV(Future Free Cash Flow of Firm) / (Shares Outstanding0)
• C) P0 = [Div1 / (rE - g)] / (Shares Outstanding0)
• D) P0 = (V0 + Cash0 - Debt0) / (Shares Outstanding0)

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Definitions:

Direct Taxation

Taxes that are imposed directly on an individual's income or wealth, and on corporations' profits.

Tenth Amendment

An amendment to the U.S. Constitution that states powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Antifederalists

Individuals who opposed the ratification of the Constitution in 1787, fearing centralized power and a lack of protections for individual rights.

National Supremacy

The principle that federal law takes precedence over state law in the United States.