Question #109
Reading: Reading 22 Market-Based Valuation - Price and Enterprise Value Multiples
PDF File: Reading 22 Market-Based Valuation - Price and Enterprise Value Multiples.pdf
Page: 37
Status: Unattempted
Correct Answer: B
Question
Which of the following statements about the method of forecasted fundamentals in price multiple valuation is most accurate?
Answer Choices:
A. It relies on the Law of One Price
B. It values an asset relative to a benchmark value of the multiple
C. It relates multiples to company fundamentals using a discounted cash flow (DCF) model
Explanation
The method of forecasted fundamentals relates multiples to company fundamentals using
a DCF method. It does not explicitly rely on the Law of One Price. Further, it does not
typically focus on benchmarks.