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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