Estimate a Venture's Required Rate of Return Based on the Following

question 39

Multiple Choice

Estimate a venture's required rate of return based on the following information: terminal value = $400,000; current year's net income = $20,000; next year's expected cash flow = $25,000; and constant growth rate = 7%.

• A)7.50%
• B)9.00%
• C)10.75%
• D)13.25%

---

Definitions:

Economic Benefits

The advantageous gains obtained from resources or actions, including income, profits, or intangible assets like brand reputation.

Fair Value

The expected price for unloading an asset or the charge for relocating a liability in an orderly market transaction at the reckoning time.

Identifiable Assets

Identifiable assets are company assets that can be separated from the entity, sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract.

Fair Value

The value likely to be obtained from disposing of an asset or the expense incurred in transferring a liability, within a structured exchange involving market entities at the time of assessment.