Terminal values tend to be a big problem with respect to the accuracy of capital budgeting due to optimistic long-run forecasts. It is generally up to the finance department to keep terminal value projections reasonable.

Question

Terminal values tend to be a big problem with respect to the accuracy of capital budgeting due to optimistic long-run forecasts.   It is generally up to the finance department to keep terminal value projections reasonable.

Quizplus · Accepted Answer

Terminal values, which are often based on long-term forecasts, can be a source of optimistic projections and potential inaccuracies in capital budgeting. It is the responsibility of the finance department to ensure that these estimates are reasonable and realistic.

Terminal Values Tend to Be a Big Problem with Respect