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The prevalent form of the DCF model in practice is the two-stage "unlevered DCF model". Which of the following statements is not correct?

The prevalent form of the DCF model in practice is the two-stage "unlevered DCF model". Which of the following statements is not correct?

A.The enterprise value will equal Stage #1 minus Stage #2.

B.Stage #1 projects unlevered FCFs using mid-year assumptions for calculating the present value of periodic cash flows.

C.Stage #2 calculates the terminal value by estimating the value of the company at the end of stage #1 then discounting it to the present.

D.Stage #1 forecast period is typically 5-10 years.

E.All cash flows are discounted using the weighted average cost of capital (WACC).

Top Answer

A.The enterprise value... View the full answer

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