Use the table for the question(s) below.

-Valuation models use the relationship between share value,future cash flows,and the cost of capital to estimate these quantities for a given firm.Realistically,for a publicly traded firm,what can we reliably use such models to determine? I.the firm's future cash flows
II the firm's cost of capital
III the firm's stock price

Question

Use the table for the question(s) below.
 
-Valuation models use the relationship between share value,future cash flows,and the cost of capital to estimate these quantities for a given firm.Realistically,for a publicly traded firm,what can we reliably use such models to determine? I.the firm's future cash flows
II the firm's cost of capital
III the firm's stock price

Quizplus · Accepted Answer

Valuation models can reliably estimate the future cash flows and cost of capital for a given firm, which are necessary inputs for estimating the firm's stock price. However, the stock price is also influenced by market factors such as investor sentiment and macroeconomic conditions, which are not fully predictable using valuation models alone. Therefore, while valuation models can provide a useful estimate of a firm's stock price, it should not be relied upon as the sole determinant of a stock's value.

Use the Table for the Question(s) Below