Exam 12: Valuation: Cash-Flow-Based Approaches

LA Sunglasses operates retail sunglass kiosks in shopping malls. Below is information related to the company: Using a five-year forecast horizon compute the sum of the present value of free cash flows accruing to common equity holders for years 2007 to 2011.

For most firms, ______________________________ include cash and short-term investment securities, accounts receivable, inventory, property, plant and equipment, intangible assets and investments in affiliated companies.

Steady-state growth in free cash flows could be driven by long-run expectations for growth attributable to

Operating assets include all of the following except

LA Sunglasses operates retail sunglass kiosks in shopping malls. Below is information related to the company: Using the above information and assuming that steady-state growth in year 2012 and beyond will be 4% calculate LA Sunglasses' current value per share.

If an analyst wants to value a potential investment in the net operating assets of a division of another firm the analyst should discount the projected free cash flows at the

If a firm generates a rate of return on __________________________________________________ equal to the discount rate used by the investor then it does not matter if an analyst uses cash flows to the investor or cash flows to the firm.

The following information pertains to Dallas, Inc. a manufacturer of Cowboy boots: What is Dallas' free cash flow for all debt and equity holders for year 2007?

WACC An analyst wants to value the sum of the debt and equity capital of the firm and is provided with the following information: An analyst wants to value the sum of the debt and equity capital of Bridgetron, compute the relevant cost of capital that should be used.

Below is information from the statement of cash flow and income statement for Graham Products, Inc. for 2002 and 2001. Marketable securities represent investments of excess cash that Graham Products does not need for operations. Graham Products' tax rate is 35%. Using the above information calculate the amount of free cash flows for common equity shareholders for Graham Products for year 2002 and 2001.

The forecasting and valuation process is particularly difficult for ______________________________ when the near term free cash flows tend to be negative.

If the objective is to value operating assets net of operating liabilities of a firm then the appropriate free cash flow measure to be used is ______________________________________________________________________.

Operating liabilities include all of the following except

One disadvantage of the free cash flow valuation method is that many times the ______________________________ dominates the total value.

Continuing free cash flows represent

If cash flow projections include the effect of inflation then the discount rate used should be a ____________________ rate.

The risk-adjusted discount rate used to compute the present value of all the projected free cash flows for common equity shareholders equals the _______________________________________________________.

If an analyst wants to value a potential investment in the net operating assets of a division of another firm the relevant cash flows the analyst should use are

If an analyst wants to value a potential investment in the common stock equity of a firm the analyst should discount the projected free cash flows at the

Which of the following is not a problem with using a dividend-based valuation formula