A) The stock valuation methods zero-growth, constant growth, variable growth, free cash flow, P/E multiple models, and book value method, to find out which is most accurate in regard to value to firms we would have to analyze each one individually. The zero, constant, and variable growth models are divided based upon the primary takes into account the dividend. The book value method would give a good result for the organizations who has assets that represent the true market value. The P/E multiple method would drive the emphasis on current year earnings and current market fluctuations. The free cash flow method would give the full weight to the earning potential of the organization in the future as well as the current state. This would be the most beneficial as it would not only analyze the current prognosis but the future potential as well. Is there a way we could measure the accuracy of our choice?
B) Volatility is not necesarily a good thing. In fact, many times it is used to measure risk. So, if forecasting your own earnings forces volatility, you may be contributing to an increase in the riskiness of your own firm. That means, a riskier firm requires higher return (risk vs. return payoff). What are your thoughts? Explain.