For what kinds of investments would terminal value account for a substantial fraction of the total NPV, and for what kind of investments would terminal value be relatively unimportant?
Investments where terminal value accounts for a substantial fraction of the total NPV would be investments that have the highest growth rate of cash flows. The terminal value of the project refers to the expected cash flow from the project at a future date, namely, by the end of the project's completion. It would therefore be most important for an organization to use ...
The solution discusses the kinds of investments that terminal account value would be a substantial fraction of the total NPV, and also discusses the kind of investments that terminal value would be relatively unimportant for, with references included.
This solution is written based on 25+ years of professional experience in the finance industry and also includes references.