Question

True or False? Discounting free cash flow to equity (FCFE) rather than dividends typically leads to higher estimates of intrinsic value.

Answer #1

**Given statement is True.**

Discounting free cash flow to equity (FCFE) rather than dividends
typically leads to **higher estimates** of intrinsic
value.

Valuation as per the FCFE will be greater than valuation as per
DDM(dividend discount model) on account of control prospective and
earlier valuation in FCFE.

FCFE is used when valuation is done from **control
prospective** and free cashflow is alligned with firm
profitability.

Valuation as per DDM cannot be greater than FCFE.

**I hope this clear your
doubt.**

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or need something else. I'll help asap.**

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