true or false
6. Binomial and Black Scholes Option Pricing Model: The multi period approach to option pricing is labeled the binomial model and with the use of continuously compounded mathematics, the Black Scholes pricing formula can be derived. The Black Scholes model assumes a constant volatility over the life of the option. 7. Out of the Money Call Option. An out-of-the-money call option would be where the stock price is greater than the exercise price.. 8. Value Proposition: The consulting model value proposition suggests that a stock price will be higher the larger the expected dividend per share (or free cash flow), the higher the market capitalization rate (or risk), and the higher the expected growth rate of dividends (or free cash flow). 9. Life Cycle Approach to Investing (LCAI). The LCAI views the individual as passing through a series of stages, bec ing ore risk seeking in later years, the rationale being that one ages, an individual uses up his/her human capital and have less time remaining to recoup possible portfolio losses through increased labor supply. 10. FCFF: The Free Cash Flow to the Firm (FCFF) is oftentimes employed by private equity firms to measure available pretax cash flows from operations minus necessary working capital and essential capital spending needs. It is discounted via WACC. For equity valuation, the FCFF is discounted by the WACC to arrive at a present value (PV), from which debt is subtracted to arrive at an equity value. 6. Binomial and Black Scholes Option Pricing Model: The multi period approach to option pricing is labeled the binomial model and with the use of continuously compounded mathematics, the Black Scholes pricing formula can be derived. The Black Scholes model assumes a constant volatility over the life of the option. 7. Out of the Money Call Option. An out-of-the-money call option would be where the stock price is greater than the exercise price.. 8. Value Proposition: The consulting model value proposition suggests that a stock price will be higher the larger the expected dividend per share (or free cash flow), the higher the market capitalization rate (or risk), and the higher the expected growth rate of dividends (or free cash flow). 9. Life Cycle Approach to Investing (LCAI). The LCAI views the individual as passing through a series of stages, bec ing ore risk seeking in later years, the rationale being that one ages, an individual uses up his/her human capital and have less time remaining to recoup possible portfolio losses through increased labor supply. 10. FCFF: The Free Cash Flow to the Firm (FCFF) is oftentimes employed by private equity firms to measure available pretax cash flows from operations minus necessary working capital and essential capital spending needs. It is discounted via WACC. For equity valuation, the FCFF is discounted by the WACC to arrive at a present value (PV), from which debt is subtracted to arrive at an equity value
