Question #58
Reading: Reading 21 Free Cash Flow Valuation
PDF File: Reading 21 Free Cash Flow Valuation.pdf
Page: 29
Status: Unattempted
Correct Answer: A
Question
The estimate of value from FCFE models will always be different than the value obtained using DDM, if:
Answer Choices:
A. FCFE is higher than dividends
B. FCFE is greater than dividends, and the excess is not invested in zero NPV projects
C. FCFE is higher than dividends, and the excess is invested in zero NPV projects
Explanation
The estimate of value from FCFE models will always be different from the value obtained
using DDM, if the FCFE is greater than dividends, and the excess cash is not invested in
zero NPV projects.