Question #27
Reading: Reading 21 Free Cash Flow Valuation
PDF File: Reading 21 Free Cash Flow Valuation.pdf
Page: 12
Status: Correct
Correct Answer: A
Question
The ownership perspective implicit in the free cash flow to equity valuation approach is of:
Answer Choices:
A. control
B. a preferred stockholder
C. a minority position
Explanation
Dividend policy can be changed by the buyer of a firm. Thus, the free cash flow
perspective looks to the source of dividends in a position of control rather than directly at
dividends.