Which of the following statements concerning the valuation of firms using the method of comparables is FALSE?
A) If two different firms generate identical cash flows, the Law of One Price will imply that both firms have the same value.
B) Comparables adjust for scale differences when valuing similar firms.
C) Valuation multiples take into account differences in the risk and future growth between the firms being compared.
D) Two firms that sell very similar products or offer very similar services will have different values if they are of different sizes.

Question

Quizplus · Accepted Answer

Valuation multiples do not inherently account for differences in risk and future growth; they are primarily used to compare firms of similar size and industry, assuming similar risk and growth prospects.

Which of the Following Statements Concerning the Valuation of Firms