Question
An RBC analyst uses FCF t+1/WACCg (where growth is non-zero) as the terminal value. The analyst determines that the firm's WACC is 11%. What types
An RBC analyst uses FCF t+1/WACCg (where growth is non-zero) as the terminal value. The analyst determines that the firm's WACC is 11%. What types of implicit assumptions about the firm's long-term RONIC and long-term growth are NOT consistent with this choice? In other words, which combinations of RONIC and growth would be inconsistent with correctly using that formula for terminal value? Highlight all that apply.
Group of answer choices
RONIC is less than WACC | Growth is positive but less than WACC
RONIC is greater than WACC | Growth is positive but less than WACC
RONIC is equal to WACC | Growth is positive but less than WACC
RONIC is less than WACC | Growth is positive and greater than WACC
RONIC is greater than WACC | Growth is positive and greater than WACC
RONIC is equal to WACC | Growth is positive and greater than WACC
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