Question #97
Reading: Reading 20 Discounted Dividend Valuation
PDF File: Reading 20 Discounted Dividend Valuation.pdf
Page: 38
Status: Unattempted
Question
Free cash flow to equity models (FCFE) are most appropriate when estimating the value of the firm:
Answer Choices:
A. only for non-dividend paying firms
B. to creditors of the firm
C. to equity holders
Explanation
FCFE models attempt to estimate the value of the firm to equity holders. The models take
in to account future cash flows due to others, including debt and taxes, and amounts
required for reinvestment to continue the firm's operations.