Question #9
Reading: Reading 21 Free Cash Flow Valuation
PDF File: Reading 21 Free Cash Flow Valuation.pdf
Page: 4
Status: Incorrect
Correct Answer: A
Your Answer: B
Question
In forecasting free cash flows it is most common to assume that:
Answer Choices:
A. historical levels of free cash flow will persist
B. the firm has no non-cash expenses
C. the firm capital structure is static
Explanation
A firm's target debt ratio is usually assumed to remain constant. Historical cash flows are
generally projected forward with a growth rate.