Why Is the Treatment of a Loan in the SVA

question 39

Multiple Choice

Why is the treatment of a loan in the SVA model is consistent with the long-term horizon of SVA?

• A) The book value of long-term liabilities is consistently used.
• B) Present value of planned future debt financing and a terminal value for estimates outside the planning range are used.
• C) The market value of debt used is consistent with the market value of the earnings represented by the discounted FCFs.
• D) Loans are assumed to be rolled over in perpetuity.
• E) The treatment of loan capital is a weakness as it is not consistent with the long-term horizon of SVA.

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Definitions:

Academically Successful

Pertaining to individuals or groups who achieve high standards or outstanding results in educational settings.

Heteronomous Morality

A stage in moral development described by Piaget where children's morals are shaped by external authority and rules, and the consequences determine the goodness or badness of an action.

Piaget

Jean Piaget, a Swiss developmental psychologist known for his theory of cognitive development that describes how children construct a mental model of the world.

Moral Development

The process by which individuals learn to differentiate right from wrong, and to develop values and ethics that guide their behavior.