Which of the following statements is false regarding the business valuation process?

Multiple Choice

• A simplified version of the discounted free cash flow valuation model assumes a zero-growth perpetuity for future cash flows. This approach is best applied to growth companies with stable cash flow patterns.

• One popular approach to estimate a firms equity cost of capital is the capital asset pricing model.

• If a company is currently generating a sustainable free cash flow of $10 per share and the discount rate is 10%, the estimated share price is $100.

• FASB contends that current accrual earnings are a proxy for free cash flow.