Which of the following statements is incorrect?
a. Free cash flows should be discounted at the firm’s weighted average cost of capital to find the value of its operations.
b. A firm’s free cash flow is the sum of its projects’ free cash flows.
c. The corporate valuation model can be used both for companies that pay dividends and those that do not pay dividends.
d. The total value of the firm does not include the value of non-operating assets.
2. Which of the following statements regarding operating assets is least accurate?
a. They are more important than the non-operating assets for the firm’s future growth and profitability.
b. They are determined by the firm’s capital budgeting decisions.
c. They generate free cash flows.
d. They are primarily financial assets.
3. Which of the following assets owned by a firm is most likely to be a non-operating asset?
a. Inventory.
b. Office building.
c. Machinery and equipment.
d. Cash.
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