Which of the following models can be used to value a firm without explicitly forecasting that firm's dividends, share repurchases, or its use of debt? I. Dividend-discount model
II. Total payout model
III. Discounted free cash flow model

Question

Quizplus · Accepted Answer

The discounted free cash flow model can be used to value a firm without explicitly forecasting its dividends, share repurchases, or use of debt. This model values the firm based on the present value of its free cash flows, which is calculated by subtracting the necessary capital expenditures from the cash flow from operations. The dividend-discount model, on the other hand, specifically focuses on valuing a firm based on its expected dividend payments. The total payout model takes into account both dividends and share repurchases. Therefore, only the discounted free cash flow model does not rely on forecasting specific payout actions by the firm.

Which of the Following Models Can Be Used to Value