To Value a Non-Dividend-Paying Firm,the Terminal Value Used in the Valuation

question 24

Multiple Choice

To value a non-dividend-paying firm,the terminal value used in the valuation calculation will most likely be based on a(n) :

• A)subjective value determined by the firm’s senior managers.
• B)salvage value of zero.
• C)target ratio.
• D)pure play rate of return.
• E)expected book value of equity.

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Definitions:

Nondiscretionary Fiscal Policy

Government fiscal policies that are automatic stabilizers, such as taxation and welfare spending, which work without specific government intervention.

Automatic Stabilizers

Economic strategies and initiatives aimed at stabilizing a country's economic fluctuations without further action from the government or policy makers.

Built-in Stabilizer

Economic policies or instruments, like progressive taxation and welfare, that automatically reduce the amplitude of economic fluctuations without additional government intervention.

Progressive Income Tax

A tax system in which the tax rate increases as the taxable amount increases, generally applied to income tax to ensure higher earners pay a larger percentage of their income.