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check current answers for first part of question and select all that apply for part 2. Several methods can be used to compute the intrinsic

check current answers for first part of question and select all that apply for part 2. image text in transcribed
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 intrinsic value-also called its the value of its operating activities (Vop) and the value of firm's nonoperating entity assets value-as the sum of , where: dividing 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 short-term scurities 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 has limited applicability because it fails to adjust for a firm's riskiness-particularly that created by managers' decisions to use debt in the firm's capital structure, or decisions regarding the payment of cash dividends. The model is useful because it demonstrates the relationship between quality of the decisions that managers make and the value of their company, A company's FCFs are a function of how effectively managers control the firm's costs, manage its operating and nonoperating assets, and generate sales revenues. The FCF valuation model recognizes that a firm's value is a function of its risk-including its use of debt and equity financing and the markets in which it operates

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