Abby Dormier is a sell- side analyst for a small Wall Street brokerage firm; she covers publicly and actively traded companies with listed equity shares. Dormier is responsible for issuing either a buy, hold, or sell rating for the shares of Company A and Company B. The appropriate valuation model for each company was chosen based on the following characteristics of each company:
Company A is an employment services firm with no debt and has fixed assets consisting primarily of computers, servers, and commercially available software. Many of the assets are intangible, including human capital. The company has a history of occasionally paying a special cash dividend.
Q:- Based on Company A’s characteristics, which of the following absolute valuation models is most appropriate for valuing that company?
A Asset based
B Dividend discount
C Free cash flow to the firm
Kindly answer the question.
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