FCF and DDM valuations should be ____________ if the assumptions used are consistent.
A)very different for all firms
B)similar for all firms
C)similar only for unlevered firms
D)similar only for levered firms
E)none of the above

Question

Quizplus · Accepted Answer

FCF and DDM valuations should be similar for all firms if the assumptions used are consistent. FCF valuation is based on the present value of estimated future cash flows, while DDM valuation is based on the present value of expected future dividends. Both methods require assumptions about future growth rates, discount rates, and other variables, but as long as these assumptions are consistent, the valuations should be similar across all firms.

FCF and DDM Valuations Should Be ____________ If the Assumptions