Estimate a Venture's Terminal Value Based on the Following Information

question 6

Multiple Choice

Estimate a venture's terminal value based on the following information: current year's net sales = $500,000; next year's expected cash flow = $16,000; constant future growth rate = 10%; and venture investors' required rate of return = 20%.

• A) $156,846
• B) $285,714
• C) $200,000
• D) $150,000
• E) $160,000

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Definitions:

Correlation

A statistical measure that describes the extent to which two variables change together, but does not imply causation.

Correlational Study

A type of research design where a researcher examines the relationship between two or more variables without manipulating them, determining whether and how they are related.

Double-Blind Experiment

A study or experiment in which neither the participants nor the researchers know who is receiving a particular treatment, to prevent bias.

Representative Sample

A fraction of a population that reliably reflects the traits of the entire group.