Question #94
Reading: Reading 21 Free Cash Flow Valuation
PDF File: Reading 21 Free Cash Flow Valuation.pdf
Page: 44
Status: Unattempted
Correct Answer: A
Question
A control perspective is most consistent with which of the following valuation approaches?
Answer Choices:
A. Price to enterprise value
B. Dividends
C. Free cash flow (FCF)
Explanation
Dividend policy can be changed by the buyer of a firm. Thus, the FCF perspective looks to
the source of dividends in a position of control rather than directly at dividends. The price
to enterprise value approach does not focus on cash flows.