In contrast to the FCFE approach, which values cash flows that are available for distribution to shareholders, the DDM approach values the stream of cash flows that shareholders expect to receive through dividend payments.

Question

Quizplus · Accepted Answer

The statement is true. The DDM approach is specifically focused on valuing the expected dividend payments to shareholders, whereas the FCFE approach looks at the cash flows that are available to be distributed to shareholders, including any debt servicing or reinvestment needs.

In Contrast to the FCFE Approach, Which Values Cash Flows