Which of the following issues related to a new venture will affect the terminal value calculation?
A)The magnitude of the cash flow at the end of the detailed forecast period
B)Aggressive assumptions about growth in the long run
C)The generation of substantial revenues in the last years of the detailed forecast period
D)Changing economic conditions that affect long term growth prospects
E)All of the above

Question

Quizplus · Accepted Answer

All of the issues listed in the answer choices can affect the terminal value calculation. The magnitude of cash flow at the end of the detailed forecast period will determine the final value used in the terminal value calculation. Aggressive assumptions about growth in the long run can lead to overestimating the terminal value. The generation of substantial revenues in the last years of the detailed forecast period can increase the terminal value. Changing economic conditions that affect long-term growth prospects can also impact the accuracy of the terminal value calculation.

Which of the Following Issues Related to a New Venture