B2-M6 Financial Valuation Methods 1 Flashcards
1
Q
what is underlying assumption of the constant growth model?
A
it’s the idea that the stock price will grow at the same rate as the dividend, thereby producing a constant growth rate
2
Q
what is company’s free cash flow?
A
free cash flow to a firm is the amount of cash that a business generates after taking into account reinvestment in non-current assets.
free CF = Net income + noncash expenses - increase in working capital - capital expenditures
