Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.

Ryan Leigh is preparing a presentation that analyzes the valuation of the common stock of two companies under consideration as additions to his firm’s recommended list, Emerald Corporation and Holt Corporation. Leigh has prepared preliminary valuations of both companies using an FCFE model and is also preparing a value estimate for Emerald using a dividend discount model. Holt’s 2019 and 2020 financial statements, contained in Exhibits 1 and 2, are prepared in accordance with US GAAP.
| Ex hl bit 1Holt Corporation Consolidated Balance Sheets(USS MIll lons) |
| As of 31 December |
| 2020 | 2019 |
| Assets |
| Current assets |
| Cash and cash equivalents | $372 | $315 |
| Accounts receivable | 770 | 711 |
| Inventories | 846 | 780 |
| Total current assets | 1，988 | 1，806 |
| Gross fixed assets | 4，275 | 3，752 |
| Less：Accumulated depreciation | 1，176 | 3，099 | 906 | 2，846 |
| Total assets | $5，087 | $4，652 |
| Liabilities and shareholders'equity |
| Current liabilities |
| Accounts payable | $476 | $443 |
| Accrued taxes and expenses | 149 | 114 |
| Notes payable | 465 | 450 |
| Total current liabilities | 1，090 | 1，007 |
| Long-term debt | 1，575 | 1，515 |
| Common stock | 525 | 525 |
| Retained earnings | 1，897 | 1，605 |
| Total liabilities and shareholders'equity |  |



| Exhibit 2Holt Corporation Consolidated Income Statement for the Year |
| Ended 31 December 2020(US SMI Ill ons) |
| Total revenues | $3，323 |
| Cost of goods sold | 1，287 |
| Selling， general， and administrative expenses | 858 |
| Earnings before interest， taxes， depreciation， and amortization(EBITDA) | 1，178 |
| Depreciation expense | 270 |
| Operating income | 908 |
| Interest expense | 195 |
| Pretax income | 713 |
| Income tax(at 32%) | 228 |
| Net income | $485 |


Leigh presents his valuations of the common stock of Emerald and Holt to his supervisor, Alice Smith. Smith has the following questions and comments:1 “I estimate that Emerald’s long-term expected dividend payout rate is 20% and its return on equity is 10% over the long term.”2 “Why did you use an FCFE model to value Holt’s common stock? Can you use a DDM instead?”3 “How did Holt’s FCFE for 2020 compare with its FCFF for the same year? I recommend you use an FCFF model to value Holt’s common stock instead of using an FCFE model because Holt has had a history of leverage changes in the past.”4 “In the last three years, about 5% of Holt’s growth in FCFE has come from decreases in inventory.”Leigh responds to each of Smith’s points as follows:1 “I will use your estimates and calculate Emerald’s long-term, sustainable dividend growth rate.”2 “There are two reasons why I used the FCFE model to value Holt’s common stock instead of using a DDM. The first reason is that Holt’s dividends have differed significantly from its capacity to pay dividends. The second reason is that Holt is a takeover target and once the company is taken over, the new owners will have discretion over the uses of free cash flow.”3 “I will calculate Holt’s FCFF for 2020 and estimate the value of Holt’s common stock using an FCFF model.”4 “Holt is a growing company. In forecasting either Holt’s FCFE or FCFF growth rates, I will not consider decreases in inventory to be a long-term source of growth.”
Smith's recommendation to use a FCFF model to value Holt is:
Option A:logical, given the prospect of Holt changing capital structure.
Option B:not logical because a FCFF model is used only to value the total firm.
Option C:not logical because FCFE represents a more direct approach to free cash flow valuation.

Answer: A