Under the competitive equilibrium assumption, the terminal value in the discounted cash flow model is the present

Question:

Under the competitive equilibrium assumption, the terminal value in the discounted cash flow model is the present value of the end-of-year book value of equity in the terminal year. Explain.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Business Analysis And Valuation

ISBN: 978-1473758421

5th Edition

Authors: Erik Peek, Paul Healy, Krishna Palepu

See More Books

Question Posted: Apr 19, 2024 02:01 AM

See More Questions

A firm is considering issuing equity and using the funds to pay off some of their debt, what is the expected impact on the firms asset beta, equity beta, and WACC? Explain
In November 2008, the Belgian InBev S.A. completed the acquisition of US-based Anheuser-Busch. The brewer acquired Anheuser-Busch for close to E40 billion, of which it classified approximately E25...
In November 2008 the Belgian InBev S.A. completed the acquisition of US-based Anheuser-Busch. The brewer acquired Anheuser-Busch for close to 40 billion, of which it classified approximately 25...
Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plastic grocery bags, styrofoam cups, and fertilizers, to estimate the firms weighted...
Selected financial information follows for Maison Corporation for the year ended December 31, 2015: Cash, Jan. 1.........................................................................$ 12,000 Cash...
A nuclear engineer is considering the effect of discharging waste heat from a power plant into a lake and estimates that this may warm the water locally to 25C. One question to be considered is the...
What are the four ways to evaluate corporate strategies? LO1
Calculate the following ratios for Lake of Egypt Marina, Inc. as of year-end 2018? Use the following financial statements for Lake of Egypt Marina, Inc. Calculate the following ratios for Lake of...
WHATS THE INTEREST RATE RETURN ON A $3,700 INVESTMENT WHEN IT GROWS TO $ 7,900 IN 19 YEARS?
Under the competitive equilibrium assumption, the terminal value in the discounted abnormal profit growth model is the present value of abnormal profit in the terminal year times minus one,...
How will the terminal values in Table 8.6 change if the revenue growth rate in years 2028 and beyond is 4 percent, and the company keeps forever its abnormal returns at the same level as in fiscal...
Diamond Company is a pesticide manufacturer. Its sales declined greatly this year due to the passage of legislation outlawing the sale of several of Diamonds chemical pesticides. During the coming...
Woodland Wearables produces two models of smartwatches, the Basic and the Flash. The watches have the following characteristics:Basic Flash Selling price per watch$ is 270$ 460 Variable cost per...
Based on the information provided and recognizing the value of coordinating across its portfolio of businesses, how should LendingTree manage these newer businesses? * as more integrated units * as...
Trust Fund Worksheet Background An inter vivos trust was created by Isaac Posney. Isaac owned a large department store in Juggins, Utah. Adjacent to the store, Isaac also owned a tract of land that...
A popular theory is that presidential candidates have an advantage if they are taller than their main opponents. Listed are heights (in centimeters) of randomly selected presidents along with the...
Gracia Enterprises operates across five industries. Task 1 : After reviewing the information provided, determine which of the five operating segments are reportable based on the revenue test, asset...
The Harvard study mentioned in the previous exercise estimated that 19% of college students abstain from drinking alcohol. To estimate this proportion in your school, how large a random sample would...
What are some of the various ways to implement an awareness program?
You are evaluating a new project for the firm you work for, a publicly listed firm. The firm typically finances new projects using the same mix of financing as in its capital structure, but this...
state, "The subscription price during a rights offering is normally r; lower ; lower r; higher er; higher than the rights-on price and
Arnold inc. is considering a proposal to manufacture high end protein bars used as food supplements by body builders. The project requires an upfront investment into equipment of $1.4 million. This...

Under the competitive equilibrium assumption, the terminal value in the discounted cash flow model is the present

Question:

Step by Step Answer:

Under the competitive equilibrium assumption the terminal value in the discounted cash flow DCF model is the present value of the endofyear book value ...View the full answer

Business Analysis And Valuation

Students also viewed these Business questions