Question #62
Reading: Reading 21 Free Cash Flow Valuation
PDF File: Reading 21 Free Cash Flow Valuation.pdf
Page: 30
Status: Unattempted
Correct Answer: A
Question
In using FCFE models, the assumption of growth should be:
Answer Choices:
A. only consistent with the assumptions of capital spending and depreciation
B. independent from the assumptions of other variables
C. consistent with assumptions of other variables
Explanation
The assumption of growth should be consistent with assumptions about other variables.
Net capital expenditures (capital expenditures minus depreciation) and beta (risk) used to
calculate required rate of return should be consistent with assumed growth rate.