Question
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
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 project's NPV?
a. $50M
b. $625M
c. $243M
d. $334M
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
