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You can answer in double option Errors in the discount rate can be problematic because (check all that apply): This produces higher measured firm beta.
You can answer in double option
Errors in the discount rate can be problematic because (check all that apply): This produces higher measured firm beta. This can lead to erroneous decisions to repurchase shares. This can lead to mistaken investment decisions. This can lead to mistaken calculations of earnings before interest and taxes (EBIT). What advice would you give to someone who was just starting to use modern valuation tools? (Please check all that apply.) Ultimately, the value of a firm is negotiated between multiple parties, and discounted cash flows are only a tool that informs the negotiation. We need to take into account the possibility that the risk-free rate and the market risk premium change over time by using a higher beta in the discount rate. The terminal value (and our assump- tions about long term growth rate) can have a disproportional effect on your calculation of the value of a firm. Using multiples to value a large, well-established, firm is always a better method than discounted cash flows. It is important to perform sensitivity analysis around the most critical assumptions of a modelStep by Step Solution
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