When determining a terminal value with which to value a firm that you are negotiating to buy, you might

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When determining a terminal value, it is important to use reasonable and realistic growth rates. If you increase the expected growth rate, you may overvalue the firm and pay more than it is worth. On the other hand, if you decrease the expected growth rate, you are taking a more conservative approach that will result in a lower terminal value. This, in turn, will decrease the current value of the firm and possibly allow you to negotiate a lower purchase price. Decreasing your required rate of return would have the opposite effect, increasing the current value of the firm and potentially leading to a higher purchase price. Therefore, option A is the best choice. When determining the terminal value, it is important to be conservative in your assumptions to avoid overvaluing the company. Decreasing the expected growth rate will make the terminal value lower, which is a more reasonable estimate of the company's future value. Decreasing the required rate of return (B) would actually increase the terminal value, which could lead to overpaying for the company. Increasing the expected growth rate (C) is also unrealistic and could lead to overvaluing the company. So, the best choice is A.

When Determining a Terminal Value with Which to Value a Firm