If you want to value a firm but do not want to explicitly forecast its dividends, what is the simplest model for you to use?
A)the dividend-discount model
B)the enterprise value model
C)the discounted free cash flow model
D)None of the above models can be used if you do not want to forecast dividends or use of debt.

Question

Quizplus · Accepted Answer

The discounted free cash flow model is the best choice when you do not want to explicitly forecast dividends. This model focuses on the company's cash flow, which is not directly tied to the payment of dividends. It considers the future free cash flows that the company will generate and discounts them back to their present value using an appropriate discount rate. This approach does not require any assumptions about the future dividend payments and is more flexible than the dividend-discount model.

If You Want to Value a Firm but Do Not