Question #33
Reading: Reading 19 Equity Valuation - Applications and Processes
PDF File: Reading 19 Equity Valuation - Applications and Processes.pdf
Page: 12
Status: Unattempted
Correct Answer: A
Question
Valuation models for equities contain estimates of required returns and:
Answer Choices:
A. known future cash flows
B. expected future cash flows
C. an assumed continuation of past cash flows
Explanation
Valuation models used for equities require the analyst to estimate the required return
applicable to the investment and to develop an expectation of future cash flows. While
cash flows for fixed-income investments are stated, no such definition is available for
equities.