A Firm Is Projected to Have a Cash Flow of $5,100

question 24

Multiple Choice

A firm is projected to have a cash flow of $5,100 next year, after which the cash flow is expected to remain constant forever. What is the the terminal value of this cash flow at the end
Of this year if the cost of capital is 10%? Round your answer to the nearest dollar.

• A)$46,364
• B)$4,636
• C)$51,000
• D)none of the above

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Definitions:

Guarantee

A formal promise or assurance, typically in writing, that certain conditions will be met or that a product will perform as stated.

Default

Failure to fulfill a legal obligation or condition, such as not making a scheduled payment on a loan.

Right of Distress

The legal ability of a landlord to seize a tenant's assets for unpaid rent or other dues.

Guarantor

A person or entity that agrees to be responsible for another's debt or obligations in the event that the latter defaults or fails to meet their contractual obligations.