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

question 28

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)$285,714
• B)$200,000
• C)$150,000
• D)$160,000

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Definitions:

Resource Inputs

The various resources used in the production of goods and services, such as labor, capital, and materials.

Marginal Revenue Product Curve

A graphical representation showing how the addition of one more unit of resource varies the revenue generated.

Demand For Fast Food

The consumer request for quick-service restaurants offering expedited food services.

Output Effect

The change in total product output that results from an alteration in economic variables such as demand, supply, or investment.