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Basic Question 2 of 3
Three-stage models are particularly useful for valuing companies
B. that are in the growth phase of their industrial life cycle.
C. with complicated capital structures.
A. in a purely competitive market.
B. that are in the growth phase of their industrial life cycle.
C. with complicated capital structures.
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Learning Outcome Statements
explain the single-stage (stable-growth), two-stage, and three-stage FCFF and FCFE models and select and justify the selection of the appropriate model given a company's characteristics;
estimate a company's value using the appropriate free cash flow model(s);
explain the use of sensitivity analysis in FCFF and FCFE valuations;
evaluate whether a stock is overvalued, fairly valued, or undervalued based on a free cash flow valuation model.
CFA® 2025 Level II Curriculum, Volume 4, Module 22.