3. Which of the following statements is CORRECT? a. The free cash flow valuation model discounts free cash flows by the required return on equity. b. The free cash flow valuation model cannot be used to find the value of a division. c. An important step in applying the free cash flow valuation model is forecasting the firm's pro (d) Free cash flows are assumed to grow at a variable (non-constant) rate beyond a specified date in forma financial statements. order to find the horizon, or terminal, value. 4. Which of the following characteristics iS normally associated with strong boards? a. CEO is the board's president. b. The board is interlocked. c. All board members are insiders of the firm. d. Board members are independent. e. Board members' compensation comes in the form of salary only. 5. Which of the following IS normally regarded as being a barrier to hostile takeovers? a. Targeted share repurchases. b. Managerial entrenchment. c. Restricted voting rights. (e) All of the above is regarded as a barrier to hostile takeovers. d. Poison pills. 6. Which one of the following statements is TRUE about the agency cost of debt? (a) Lenders will protect themselves from asset switching (bait-and-switch) by charging a highe interest rate, but this can be mitigated (at least in theory) by strong restrictive covenants. b. Creditors have a claim on a firm's earning stream through the dividend payments they rec c. An example of asset switching is an option to exchange one piece of rea e. Firms borrowing money have more flexibility to use that money when there are debt c