Using the free cash flow method of valuation, an analyst determines the value of Company A's stock to be $10 and the value of Company B's stock to be $14. Based on this information, which of the following statements is most accurate?
1) Using the dividend valuation model, the value of company A's stock will be lower than the value of Company B's stock.
2) Other things being equal, if Company A and Company B have the same firm value, Company B must have more debt, thus leveraging its returns for the benefit of shareholders.
3) Other things being equal, if Company A and Company B have the same firm value, Company A may have more shares of stock outstanding than Company B.
4) Company B's required rate of return is higher than Company A's required return.
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