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DCF sensitivity to terminal-value assumption is highest when:
AGrowth rate is fixed at zero perpetually
BThe explicit forecast horizon is very long (20+ years)
CDiscount rate is much higher than growth rate
DThe explicit forecast horizon is short relative to firm's life
Answer & Solution
Correct answer: D. The explicit forecast horizon is short relative to firm's life
1. Identify what the question asks: this concept maps to tvsensitivity (§2.5).
2. Apply the framework or formula relevant to the topic.
3. Eliminate distractors and arrive at the correct option (D).
_Source: ICAI BoS CA Final Paper 2, Ch 13 "Business Valuation"_
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