Question #11
Reading: Reading 21 Free Cash Flow Valuation
PDF File: Reading 21 Free Cash Flow Valuation.pdf
Page: 5
Status: Correct
Correct Answer: A
Question
Dividends paid out to the shareholders:
Answer Choices:
A. may be higher than free cash flow to equity FCFE
B. are always less than free cash flow to equity (FCFE)
C. are always equal to free cash flow to equity (FCFE)
Explanation
Dividends represent the cash that the firm chooses to pay to the shareholders and the
amount of the dividend is subject to the discretion of the firm. Dividends can be equal to,
lower or higher than FCFE. For example, sometimes firms may pay dividends in years when
there is a net loss.