In the DCF analysis, a critical cash flow is the determination of the Terminal Value of the project at the end of its economic life.

Hence the name, terminal value.

This figure represents the sum of all future cash flows after the project has terminated.

It summarizes the value of the investment at the end of the forecasted cash flows.

One popular model to find the terminal value is the Perpetuity Model.

A perpetuity is a cash flow that is equal and consecutive and it goes on forever at its fixed amount.

You are looking at a project with a 6 year economic life.

You found the regular year 6 free cash flow to be $85,000.

The projected cash flow in year 7 is $100,000.

The required discount rate is 11.5%.

Based on the Perpetuity Model, what is only the terminal value in year 6?

	a.	Terminal Value in Year 6 = $968,565
	b.	Terminal Value in Year 6 = $565,869
	c.	Terminal Value in Year 6 = $739,130
	d.	Terminal Value in Year 6 = $869,565