If the Cash Flows of the Firm Are Not Expected

question 38

True/False

If the cash flows of the firm are not expected to grow or are expected to grow at a constant rate indefinitely, the discount rate used by practitioners often is referred to as the capitalization rate.

---

Definitions:

Par Value

The face value of a bond or stock, which is the amount paid back to the bondholder at maturity.

Coupon Bond

A type of bond that pays the holder a fixed interest rate (coupon rate) over the bond's lifetime and repays the principal at maturity.

Yield To Maturity

The total return anticipated on a bond if it is held until the maturity date, considering all interest payments received and principal repaid.

Total Rate Of Return

The comprehensive measure of investment performance, combining both capital gains and interest or dividends, over a specific period.