The Terminal Value of a Company Is Based on Which

question 46

Multiple Choice

The terminal value of a company is based on which one of these assumptions?

• A)The growth rate of the future cash flows will exceed the company's WACC.
• B)All future cash flows will be constant.
• C)The cash flows after Time T will diminish on an annual basis.
• D)The cash flows will increase in the future at a constant perpetual rate.
• E)The company will be sold at Time T for the stated terminal value.

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Definitions:

Note Payable-State Bank

A debt obligation in the form of a written promissory note made to a state bank, specifying the terms under which repayment will be made.

Collateralized Borrowing

Obtaining a loan by pledging an asset as security for the loan, which the lender can seize if the borrower defaults.

Assets

Resources owned by a company that provide future economic benefits.

Liabilities

Financial obligations or debts that an entity owes to others, which must be settled over time through the transfer of economic benefits.