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Deion Stewart
on Dec 01, 2024

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Cash flows have been estimated in detail for the first six years of a new venture's life. Management feels the new business will go on indefinitely, and will probably grow at an average rate of 3% per year starting at $50M in year seven. The project is being evaluated using a cost of capital of 11%. What is the contribution of this terminal value assumption to the sixth year cash flow?

A) $50M
B) $625M
C) $455M
D) $1,667M

Cost of Capital

The earnings rate a firm must reach through its investments to uphold its market worth and secure financing.

Terminal Value

The estimated value of a business or an investment at the end of a specific period, taking into account expected future cash flows.

Cash Flows

Cash flows denote the overall volume of cash and cash-equivalents moving in and out of a company.

  • Acquire knowledge about how final values and assumptions of growth shape the evaluation of projects.
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Au Tieu Vy - K15 FUG CTDec 06, 2024
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