Asked by Sonia Sheikh on May 10, 2024

verifed

Verified

In a multi stage growth model, the majority of the value can be found in the ______________.

A) near term dividends
B) discount rate
C) dividend growth
D) terminal growth rate
E) None of the options are correct.

Terminal Growth Rate

The rate at which a company is expected to grow its dividends or free cash flow beyond the forecast period, into perpetuity, during valuation.

Multi Stage Growth Model

A valuation method that applies different rates of growth to a company's earnings or dividends over various time horizons.

Discount Rate

The interest rate used to determine the present value of future cash flows.

  • Understand the components and importance of growth in the multi-stage growth model.
verifed

Verified Answer

JP
Juliel PelaezMay 11, 2024
Final Answer :
D
Explanation :
In a multi-stage growth model, the majority of the value is often found in the terminal growth rate. This is because the terminal value typically captures the bulk of a company's value, assuming it grows at a steady rate into perpetuity after the initial high-growth phase.