When Using Discounted Cash Flow Analysis for Valuation, the Appraiser

question 30

Multiple Choice

When using discounted cash flow analysis for valuation, the appraiser must estimate the sale price at the end of the expected holding period. This price (assuming selling expenses have yet to be accounted for) is referred to as the property's:

• A) net sale proceeds
• B) selling expenses
• C) terminal value
• D) current market value

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Definitions:

After-Tax Operating Income

The income a company generates from its operations after subtracting taxes.

Required Return

The minimum expected return by investors for investing in a particular security or project, reflecting the risk level.

Fixed Assets

Long-term tangible assets held for business use and not expected to be converted to cash in the short-term.

Operating Costs

Expenses associated with the ongoing operations of a business, such as wages, rent, and utilities, excluding costs linked to producing goods.