CFA Practice Question

There are 201 practice questions for this study session.

CFA Practice Question

The income approach may be used to value a company in its:
A. initial development stage.
B. high growth stage.
C. stable and mature stage.
Explanation: A free cash flow method can be used for a company in this stage.

User Contributed Comments 2

User Comment
Hishy So stable and mature stage is more suited to market approach?
SMcalister I believe that initial development should use the present value of growth opportunities (PVGO) as the company has very little to value itself on, other than what it may be able to offer.

Stable and mature companies can use intrinsic valuations through dividend discounts or relative valuation through P/E ratios or whatever you would like.
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