Which of the Following Statements Concerning the Valuation of Firms

question 41

Multiple Choice

Which of the following statements concerning the valuation of firms using the method of comparables is FALSE?

• A) If two different firms generate identical cash flows, the Law of One Price will imply that both firms have the same value.
• B) Comparables adjust for scale differences when valuing similar firms.
• C) Valuation multiples take into account differences in the risk and future growth between the firms being compared.
• D) Two firms that sell very similar products or offer very similar services will have different values if they are of different sizes.

Understand the structure and significance of transfer programs at the federal level.

Recognize the role and forms of property income.

Comprehend the concept and implications of the Lorenz curve and Gini coefficient in measuring income distribution.

Distinguish between different types of income.

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Definitions:

Variable Costs

Expenses that vary directly with the amount of production output of a company.

Purely Competitive Industry

Characterized by many firms selling identical products, where no single firm can influence the market price, ensuring competition based on price.

Short-Run Costs

Costs that vary with the level of output in the short term, where some inputs are fixed.

Fertilizer

A substance, either chemical or organic, introduced to soil or land to improve its fertility and boost the growth of plants.