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Question 11.A.6: Can you think of another simplifying assumption that may be ...

Can you think of another simplifying assumption that may be used to help calculate the terminal value? (Hint: Think back to the dividend valuation models in Chapter 8.)

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A constant growth rate beyond the planning horizon may be assumed. In this case, the formula will be TV\ =\ C_{1} /(r-g), where g is the expected annual growth rate. Deriving an appropriate growth rate can be a difficult problem, however.

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