Question

Match each of the following items(1-5)on the left with related explanations(A-E) on the right

1. Multiples approaches A. An amount inserted into balance sheet to ensure the balance sheet balances

2. Free cash flow B. A shortcut valuation technique that computes stock price as a multiple of some measure

3. Perpetuity growth formula C. The company's internally generated operating cash flows available to investors

4. Plug figure D. A shortcut valuation technique that computes stock value as a function of a growing cash flows into perpetuity

5. Cost of common equity E. A risk adjusted discount rate that reflects the riskiness of the equity cash flows

Answer 1

1. Multiples approaches - A shortcut valuation technique that computes stock price as a multiple of some measure

2. Free cash flow - The company's internally generated operating cash flows available to investors

3. Perpetuity growth formula - A shortcut valuation technique that computes stock value as a function of a growing cash flows into perpetuity

4. Plug figure - An amount inserted into balance sheet to ensure the balance sheet balances

5. Cost of common equity - A risk adjusted discount rate that reflects the riskiness of the equity cash flows