Reading 47: Free Cash Flow Valuation - LOS j ～ Q16-18

答案和详解如下：

16.The stable-growth FCFF model is more useful in valuing firms that:

A)   have capital expenditures that are significantly higher than depreciation.

B)   are growing at a rate significantly higher than that of the overall economy.

C)   are growing at a rate significantly lower than that of the overall economy.

D)   have capital expenditures that are not significantly higher than depreciation.

The correct answer was D)

The stable-growth FCFF model is useful for valuing firms that are expected to have growth rates close to that of the overall economy. Since the rate of growth approximates that for the overall economy, these firms should have capital expenditures that are not significantly different than depreciation.

17.Which of the following is most useful in analyzing firms that have high leverage and high growth?

A)   Two-stage FCFE model.

B)   Two-stage FCFF model.

C)   Stable-growth FCFF model.

D)   Stable-growth FCFE model.

The correct answer was B)

Out of the four cash flow valuation models mentioned above, the two-stage FCFF model is most useful in analyzing the firms that have high leverage and high growth. The high growth will make the stable growth models inapplicable, while the high leverage makes the FCFF model more attractive.

18.The three-stage FCFE model might result in an extremely high value if:

A)   the growth rate in the stable-period is too high.

B)   the growth rate in the stable-period is equal to that of GNP.

C)   the growth rate in the stable-period is too low.

D)   the high growth and transition periods are too short.

The correct answer was A)

If the growth rate in the stable-period is too high or the high-growth and transition periods are too long, the three-stage FCFE model might result in an extremely high value.