Which of the following statements is FALSE?
A)The long-run growth rate gFCF is typically based on the expected long-run growth rate of the firm's revenues.
B)Because the firm's free cash flow is equal to the sum of the free cash flows from the firm's current and future investments,we can interpret the firm's enterprise value as the total NPV that the firm will earn from continuing its existing projects and initiating new ones.
C)If the firm has no debt then rwacc = the risk-free rate of return.
D)When using the discounted free cash flow model,we forecast the firm's free cash flow up to some horizon,together with some terminal (continuation)value of the enterprise.

Question

Quizplus · Accepted Answer

This statement is false because if the firm has no debt, then rwacc (weighted average cost of capital) will be equal to the cost of equity, which is typically higher than the risk-free rate of return.

Which of the Following Statements Is FALSE