Question

Which of the following statements is FALSE? When using the total payout model, we discount total...

Which of the following statements is FALSE?

When using the total payout model, we discount total dividends and share repurchases, and use the growth rate in earnings when forecasting the growth of the firm's payout.

In the total payout model, we first value the firm's equity, rather than just a single share.

The NPV of any individual project represents its contribution to the firm's enterprise value.

To estimate a firm's enterprise value, we compute the present value of the free cash flows (FCF) that the firm has available to pay equity holders.

Homework Answers

Answer #1

All the statements are true except statement (d) estimate the value of of firm enterprise value, we will computing the present value of free cash flow that firm had available to pay to share holder but free cash flows will be available to both equity share holder as well as debt holder hence, given statement will be false.

All the other statements are true.

Correct answer will be option (d) To estimate Firm enterprise value, we compute the FCF that firm has available to pay equity holder.

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