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Using the constant growth value of operations model that explicitly includes the "value drivers," which of the following statements is most reasonable?

a. An increase in sales growth (g) will increase firm value

b. An increase in operating profitability (OP), other value drivers constant, will increase firm value

c. An increase in the WACC and the capital requirement ratio (CR) that accompanies an increase in sales growth (g) can result in a decrease in firm value

d. Other value drivers held constant, a lower capital requirement ratio (CR) will lower firm value for a given increase in sales growth, g

e. Answers b. and c. are most reasonable.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M942622

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