The constant growth method of valuation often is used to estimate a firm's terminal growth period value. Small changes in the key underlying assumptions such as the terminal growth rate and the discount rate used during the terminal period seldom have very large impacts on the firm's enterprise and equity values.

Question

Quizplus · Accepted Answer

Small changes in the key underlying assumptions can have significant impacts on the firm's enterprise and equity values, especially during the terminal growth period. Therefore, it is important to carefully consider and choose appropriate assumptions for accurate valuation.

The Constant Growth Method of Valuation Often Is Used to Estimate