A firm forecasts of cash flows ($millions) in years 1 thru 4 to be $120, $130, 135, and
$137, respectively. If the project ends at the end of the fourth year, what is the horizon value given the company has historical growth of 3% and a discount rate of 10%? (answers in
$millions)
A) $0
B) $1.37
C) $1.96
D) $4.87

Question

Quizplus · Accepted Answer

The horizon value is $0 because the project ends at the end of the fourth year, meaning there are no cash flows beyond year 4 to calculate a terminal value.

A Firm Forecasts of Cash Flows ($Millions) in Years 1