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LOS g: Contrast the recognition of value in the FCFE model with the recognition of value in dividend discount models.
Q1. The primary difference between the three-stage DDM and the FCFE model is:
A) growth rate assumptions.
B) cost of equity.
C) the definition of cash flows.
Q2. The estimate of value from FCFE models will always be different than the value obtained using DDM, if:
A) FCFE is higher than dividends, and the excess is invested in zero NPV projects.
B) FCFE is greater than dividends, and the excess is not invested in zero NPV projects.
C) FCFE is higher than dividends.
Q3. The difference between the value estimate produced by the dividend discount model (DDM) and the one produced by the free cash flow to equity (FCFE) model can be accounted for by which of the following?
A) Different sales forecast.
B) Different estimates of model risk.
C) The value in controlling the firm's dividend policy.
Q4. When FCFE is greater than dividends, the value obtained using FCFE will equal the value obtained using DDM if the:
A) values will never be equal if FCFE is greater than dividends.
B) excess cash is invested in projects with positive NPV.
C) excess cash is invested in projects with net present value (NPV) of zero.
Q5. When are the free cashflow to equity (FCFE) model and the dividend discount model (DDM) valuations different? When FCFE:
A) is greater than dividends and excess cash is invested in projects with a net present value of 0.
B) equals dividends.
C) is greater than dividends and excess cash is invested in projects with a positive net present value. | 
发表于 2009-3-9 15:34
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