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Terminal Value in a DCF reflects:
AValue of cash flows in the explicit forecast horizon only
BValue of book equity at year zero
CValue of cash flows beyond the explicit forecast horizon
DLiquidation proceeds at the end of year one
Answer & Solution
Correct answer: C. Value of cash flows beyond the explicit forecast horizon
1. Identify what the question asks: this concept maps to terminalvalue (§2.5).
2. Apply the framework or formula relevant to the topic.
3. Eliminate distractors and arrive at the correct option (C).
_Source: ICAI BoS CA Final Paper 2, Ch 13 "Business Valuation"_
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