2) The value of the firm when using dividends as the cash flow will often be different from the value using FCFE as the cash flows. Which of the following statements is correct concerning the two different estimates?

a. If FCFE is greater than dividends and projects are earnings high returns it is likely the dividend model will provide a higher value.

b. If there is a significant chance that the firm can be taken over and the management changed, the market price will reflect that possibility and using FCFE is more appropriate.