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CFA Level 2
Intermediate
1/20
When calculating the terminal value in a free cash flow to the firm (FCFF) valuation model, which of the following assumptions is typically made about the company's growth rate?
a.
The company's growth rate is assumed to converge to the long-term growth rate of the overall economy.
b.
The company's growth rate is assumed to gradually decline over time until it reaches zero in the long run.
c.
The company's growth rate is assumed to remain constant at the same level as during the explicit forecast period.
Intermediate