Question

In: Finance

Which of the following statements about the FCF valuation model are true? Check all that apply....

Which of the following statements about the FCF valuation model are true? Check all that apply.

A. The model has limited applicability because it fails to adjust for a firm's riskiness—particularly that created by managers' decisions to use debt in the firm's capital structure, or decisions regarding the payment of cash dividends.

B. The model is useful because it examines the relationship between a company's risk, operating profitability, and value of the firm's operations.

C. A company's FCFs are a function of how efficiently and effectively the firm's managers use the company's operating assets and, in turn, the profitability of the company's primary business activities.

D. The FCF valuation model recognizes that a firm's value is a function of its risk—including its use of debt and equity financing and the markets in which it operates.

Solutions

Expert Solution

Ans : The Following statements about FCF Valuation model are true :
b) The model is useful because it examines the relationship between a company's risk, operating profitability, and value of the firm's operations.

c) A company's FCFs are a function of how efficiently and effectively the firm's managers use the company's operating assets and, in turn, the profitability of the company's primary business activities.

d) The FCF valuation model recognizes that a firm's value is a function of its risk—including its use of debt and equity financing and the markets in which it operates.


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