Which of the following statements concerning the Price to Cash-Flow approach to stock valuation are true?
I.The Price to Cash-Flow method works just as well for non-dividend paying stocks as it does for dividend-paying stocks.
II.The Price to Cash-Flow calculate s the intrinsic value of a stock as the present value of future cash flows.
III.The Price to Cash-Flow ratio divides the market price of one share of stock by cash flow per share.
IV.The Price to Cash-Flow method does not directly calculate the intrinsic value of a share.
A)I and II only
B)III and IV only
C)I, III and IV only
D)I, II and III only

Question

Quizplus · Accepted Answer

The Price to Cash-Flow method is useful for both dividend and non-dividend paying stocks (I), it involves dividing the market price by cash flow per share (III), and it does not directly calculate intrinsic value (IV). Statement II is incorrect as it describes a discounted cash flow approach, not the Price to Cash-Flow method.

Which of the Following Statements Concerning the Price to Cash-Flow