DCF PRACTICE QUESTIONS PART 1 (APPROACHES
TO VALUATION)
Question 1 - DCF Valuation Fundamentals:
Discounted cash flow valuation is based upon the notion that the value of an asset is
the present value of the expected cash flows on that asset, discounted at a rate that
reflects the riskiness of those cash flows. Specify whether the following statements
about discounted cash flow valuation are true or false, assuming that all variables are
constant except for the variable discussed below:
As the discount rate increases, the value of an asset increases. - Answers - False. The
reverse is generally true.
Question 1 - DCF Valuation Fundamentals:
Discounted cash flow valuation is based upon the notion that the value of an asset is
the present value of the expected cash flows on that asset, discounted at a rate that
reflects the riskiness of those cash flows. Specify whether the following statements
about discounted cash flow valuation are true or false, assuming that all variables are
constant except for the variable discussed below:
As the expected growth rate in cash flows increases, the value of an asset increases. -
Answers - True. The value of an asset is an increasing function of its cash flows.
Question 1 - DCF Valuation Fundamentals:
Discounted cash flow valuation is based upon the notion that the value of an asset is
the present value of the expected cash flows on that asset, discounted at a rate that
reflects the riskiness of those cash flows. Specify whether the following statements
about discounted cash flow valuation are true or false, assuming that all variables are
constant except for the variable discussed below:
As the life of an asset is lengthened, the value of that asset increases. - Answers -
True. The value of an asset is an increasing function of its life.
Question 1 - DCF Valuation Fundamentals:
Discounted cash flow valuation is based upon the notion that the value of an asset is
the present value of the expected cash flows on that asset, discounted at a rate that
reflects the riskiness of those cash flows. Specify whether the following statements
about discounted cash flow valuation are true or false, assuming that all variables are
constant except for the variable discussed below:
As the uncertainty about the expected cash flows increases, the value of an asset
increases. - Answers - False. Generally, the greater the uncertainty, the lower is the
value of an asset.
Question 1 - DCF Valuation Fundamentals:
Discounted cash flow valuation is based upon the notion that the value of an asset is
the present value of the expected cash flows on that asset, discounted at a rate that
reflects the riskiness of those cash flows. Specify whether the following statements
TO VALUATION)
Question 1 - DCF Valuation Fundamentals:
Discounted cash flow valuation is based upon the notion that the value of an asset is
the present value of the expected cash flows on that asset, discounted at a rate that
reflects the riskiness of those cash flows. Specify whether the following statements
about discounted cash flow valuation are true or false, assuming that all variables are
constant except for the variable discussed below:
As the discount rate increases, the value of an asset increases. - Answers - False. The
reverse is generally true.
Question 1 - DCF Valuation Fundamentals:
Discounted cash flow valuation is based upon the notion that the value of an asset is
the present value of the expected cash flows on that asset, discounted at a rate that
reflects the riskiness of those cash flows. Specify whether the following statements
about discounted cash flow valuation are true or false, assuming that all variables are
constant except for the variable discussed below:
As the expected growth rate in cash flows increases, the value of an asset increases. -
Answers - True. The value of an asset is an increasing function of its cash flows.
Question 1 - DCF Valuation Fundamentals:
Discounted cash flow valuation is based upon the notion that the value of an asset is
the present value of the expected cash flows on that asset, discounted at a rate that
reflects the riskiness of those cash flows. Specify whether the following statements
about discounted cash flow valuation are true or false, assuming that all variables are
constant except for the variable discussed below:
As the life of an asset is lengthened, the value of that asset increases. - Answers -
True. The value of an asset is an increasing function of its life.
Question 1 - DCF Valuation Fundamentals:
Discounted cash flow valuation is based upon the notion that the value of an asset is
the present value of the expected cash flows on that asset, discounted at a rate that
reflects the riskiness of those cash flows. Specify whether the following statements
about discounted cash flow valuation are true or false, assuming that all variables are
constant except for the variable discussed below:
As the uncertainty about the expected cash flows increases, the value of an asset
increases. - Answers - False. Generally, the greater the uncertainty, the lower is the
value of an asset.
Question 1 - DCF Valuation Fundamentals:
Discounted cash flow valuation is based upon the notion that the value of an asset is
the present value of the expected cash flows on that asset, discounted at a rate that
reflects the riskiness of those cash flows. Specify whether the following statements
