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Homework answers / question archive / 1) Which of the following is not a problem with using a dividend-based valuation formula 2)2
1) Which of the following is not a problem with using a dividend-based valuation formula
2)2. The conceptual framework for free cash flows separates the balance sheet equation into the following categories:
3)3. The conceptual framework for free cash flows separates all assets and liabilities into the following categories:
4)4. Starting with net cash flow from operations and adjusting for capital expenditures and dividends equals
5)5. When calculating free cash flows to common equity shareholders, financing activities do not include:
6)6. If an analyst wants to value a potential investment in the common stock equity in a firm, the relevant cash flows the analyst should use are
7)7. If an analyst wants to value a potential investment in the net operating assets of a division of another firm, the relevant cash flows the analyst should use are
8)8. If an analyst wants to value a potential investment in the common stock equity of a firm, the analyst should discount the projected free cash flows at the
9)9. If an analyst wants to value a potential investment in the net operating assets of a division of another firm, the analyst should discount the projected free cash flows at the
10)10. A disadvantage of the free cash flow valuation method is
b.
dividends represent a transfer of wealth to shareholders
OA + FA = OL + FL + SE
Operating and financial
free cash flow
Adjustments for capital expenditures
free cash flows to common equity shareholders
free cash flows for all debt and equity capital stakeholders
required return on equity capital
weighted average cost of capital
The terminal value tends to dominate the total value in many cases.
