3. Fundamentals of the free cash flow corporate valuation model Aa Aa E Several methods can be used to compute the intrinsic value of a share of a company's common stock. One method uses the free cash flow (FCF) valuation model, while the another method uses the dividend discount model. The FCF valuation model computes a firm's value-also called its the value of its operating activities (Vop) and the value of firm's nonoperating value-as the sum of , where: the firm's expected future free cash flows by its weighted average Vop is computed by cost of capital. A firm's nonoperating assets include its highly marketable securities in which a firm invests its temporarily available excess cash, and its investments in other businesses. Which of the following statements about the FCF valuation model are true? The model is useful because it demonstrates the relationship between quality of the decisions that managers make and the value of their company. The FCF valuation model reflects the firm's riskiness-as it affects the company's intrinsic value-via the WACC variable. O The model can only be used to value companies-but not their component divisions or other smaller operating units. O A company's FCFs are a function of (1) how quickly the company grows its sales and assets, (2) managers control the firm's costs, and (3) choose to finance the company's activities