A Colleague Recommends a Shortcut to Value the Company in the Preceding

question 6

True/False

A colleague recommends a shortcut to value the company in the preceding question.Rather than compute each scenario separately,the colleague recommends averaging each input,such that growth equals 5 percent and ROIC equals 15 percent.This will lead to the same enterprise value as found in that question.

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Definitions:

Semi-Annual

Occurring twice a year; pertaining to a period of six months.

Coupon Bond

A debt security that pays the holder a fixed interest rate, known as the coupon, usually annually or semi-annually, until its maturity date.

Present Value

The present-day value of future money or cash flows, based on a specific rate of return.

Coupon Bonds

Debt securities that pay holders a fixed interest rate (the coupon) on a periodic basis until the bond matures, at which point the principal amount is repaid.