Estimates of a stock's intrinsic value calculated with the free cash flow methodology depends most critically on _______.

Question

Quizplus · Accepted Answer

The terminal value used in the calculation of intrinsic value is the most critical factor in the free cash flow methodology. It represents the expected value of free cash flows beyond the explicit forecast period and can significantly impact the estimated intrinsic value. Of course, all the other factors mentioned also play a role, but the terminal value holds the most weight in the calculation.

Estimates of a Stock's Intrinsic Value Calculated with the Free