1. Which of the following factors is excluded from the calculation of free cash flow to the firm?

1. Principal repayments
2. Operating income
3. Depreciation
4. The change in working capital
5. Gross plant and equipment spending

1. Which of the following is not true about the constant growth valuation model?

1. The firms free cash flow is assumed to be unchanged in perpetuity
2. The firms free cash flow is assumed to grow at a constant rate in perpetuity
3. Free cash flow is discounted by the difference between the appropriate discount rate and the expected growth rate of cash flow.
4. The constant growth model is sometimes referred to as the Gordon Growth Model.
5. If the analyst were using free cash flow to the firm, cash flow would be discounted by the firms cost of capital less the expected growth rate in cash flow.

. In determining the purchase price for an acquisition target, which one of the following valuation methods does not require the addition of a purchase price premium?

1. Discounted cash flow method
2. Comparable companies method
3. Comparable industries method
4. Recent transactions method
5. A & B only