Answer: FCFE

## Explanation **Valuation for Takeover Scenarios:** - **FCFE (Free Cash Flow to Equity) is most suitable** for takeover valuations because: - It represents the cash flow available to equity holders after all expenses, reinvestment needs, and debt financing - In a takeover scenario, the acquirer gains control over the company's cash flows and can potentially change dividend policies - FCFE captures the full cash-generating capacity available to equity holders, regardless of current dividend policies - **Dividends are less suitable** because they represent only the portion of cash flow that management chooses to distribute, which may not reflect the company's full cash-generating potential. - **Cash flow from operations** is incomplete as it doesn't account for capital expenditures and changes in working capital needed to maintain operations.

Author: LeetQuiz Editorial Team