Series 79 practice questioneasyAdvanced Financial Analysis
Which method is commonly used to estimate terminal value in a DCF analysis?
- ABook value approach
- BDiscounted payback method
- CNet present value of dividends
- DPerpetuity growth method✓ Correct answer
Explanation
Why D — Perpetuity growth method
The perpetuity growth method estimates terminal value by applying a constant growth rate to final year cash flows. Using other methods ignores key DCF terminal value mechanics.
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