A Company Forecasts Growth of 6% for 5 Years and 3

question 34

Multiple Choice

A company forecasts growth of 6% for 5 years and 3% thereafter. Given last year's cash flow was $100, what is the horizon value if the company cost of capital is 8%?

• A) $0
• B) $1,672
• C) $2,000
• D) $2,676

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account that represents estimates of receivables that may not be collectible.

Transactions and Events

Transactions refer to the economic activities that impact financial status, and events are occurrences that can affect the company's financial position.

Balance Sheet

A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time.

Percentage of Sales Method

A financial forecasting technique where future values such as budgets or debt levels are estimated based on a specified percentage of sales.