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

Multiple Choice

• Firms that earn less than the cost of equity capital produce negative abnormal earnings and generally have a share price below book value.

• Forecasting future cash flows requires calculations using factors from future value tables.

• A component of earnings that is unrelated to future free cash flows or future earnings and is not pertinent to assessing current share price is considered a noise component.

• Income or loss from discontinued operations is considered a transitory component of a firms earnings.