True capacity to generate cash flows for stockholders

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Reference no: EM131583283

1. Because many firms do not pay out their FCFE as dividends, the Dividend Discount Model may not capture their true capacity to generate cash flows for stockholders.

2. When we compute the Equity Risk Premium for an Emerging Markets firm (Brazil. China, India. Russia, etc.) that operates in many countries, we calculate a weighted-average of each country's ERP. This results in higher valuations than would be the case if we would only compute the ERP of the country where the firm is incorporated. Is this last statement true or false?

Reference no: EM131583283

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