When Estimating the Terminal Value of a Venture Using an Equity

question 56

Multiple Choice

When estimating the terminal value of a venture using an equity valuation method, a perpetuity growth equation that uses the capitalization (cap) rate for discounting purposes is often applied. This cap rate is measured as the __________ rate __________ the perpetuity growth rate.

• A)equity discount; minus
• B)equity discount; plus
• C)risk-free; plus
• D)risk-free; minus

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