Question
You value a company using the discounted free cash flow model and the residual operating income model. You are surprised that the valuations are different.
- You value a company using the discounted free cash flow model and the residual operating income model. You are surprised that the valuations are different. Which of the following could be the cause?
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| A. | Your forecast horizon is too short |
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| B. | You have assumed that weighted-average cost of capital (WACC) will be constant in the future |
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| C. | You have forecasted that the companys leverage will stay constant |
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| D. | You have forecasted sales growth to converge to the long-run economic growth rate |
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| E. | Your steady state forecast has net operating assets growing at the terminal growth rate |
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Auditing Cases An Interactive Learning Approach
Authors: Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt
5th edition
132567237, 978-0132998345, 132998343, 978-0132567237
